Jakarta –
Russia is heading for default and is at risk of defaulting on its foreign debt. This threatens the country’s economic crisis so that the economy could fall deeper.
What are Defaults?
Default occurs when the borrower of government money is unable to pay according to a predetermined maturity.
The government borrows money from a country by issuing bonds. Both domestic and foreign investors, when they buy the bonds, they are indirectly promised to get debt payments plus the interest percentage determined at maturity.
Russia itself has not defaulted on its foreign debt obligations since the Bolshevik revolution of 1917. But why is Russia currently in danger of not paying its bills?
Actually Russia has money. But the money wasn’t enough to pay for all the current hassles.
In 2014, Russia was sanctioned by Western countries for its annexation of Crimea, then the Russian government has built up US$ 640 billion (Rp 9.17 trillion) of foreign exchange reserves.
But half of those funds are now frozen under Western sanctions because of the recent invasion of Ukraine.
As a result, Russia said that it plans to pay creditors from ‘hostile countries’ in its original currency, the ruble, instead of US dollars or euros until sanctions are lifted.
However, global creditworthiness institutions such as S&P, Fitch and Moody’s consider it to be the initial cause of the default in Russia. Until finally the three global institutions downgraded Russia’s debt rating to CC or commonly known as ‘junk’.
What happens if Russia Defaults?
“The default is a disaster for Russia,” said Timothy Ash, senior strategist at BlueBay Asset Management.
His attack on Ukraine has left many traces, including the disappearance of several international friends. Add to that a default that is likely to cut access to foreign finance for years.
The Russian economy is falling apart. Why? Since the war began its own currency has fallen to record lows, earnings have been critical as oil traders avoid buying oil from Russia, dozens of international companies have also ‘unplugged’ from Russia, hit again by sanctions that have frozen more than US$300 billion in currency reserves. foreign money.
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(dna / dna)
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