Moscow said on Sunday it would direct an additional Rs 273.4 billion ($ 3.4 billion) to its rainy day fund, of which Rs 271.6 billion came from oil and gas revenues. the first quarter of this year. The extra money “will be used, among other things, to implement measures aimed at ensuring economic stability in the context of external sanctions,” the government said. The Russian economy is likely to shrink by 10 percent this year, according to consensus forecasts by economists. Nevertheless, earnings from exports of goods and harsh capital controls have helped Moscow stabilize its currency and prevent an economic collapse in the face of severe economic sanctions imposed by Western countries and their partners. So far, Russia’s economy has been boosted by oil and gas revenues and draconian capital controls, which are preventing most foreign traders from withdrawing their investments. However, S&P Global Ratings downgraded Russia’s credit rating to “selective bankruptcy” this weekend after Moscow announced it would make payments on the last tranche of its foreign currency bonds in rubles when they expire in dollars. Russia has continued to pay its dollar-denominated bonds since the beginning of the invasion, confusing many investors’ expectations that Western sanctions and Russian currency controls would lead the country to its first foreign currency default since 1998. Last week, however, Moscow was to make a $ 84 million voucher payment and a $ 552 million repayment of a maturity bond, for which it offered to pay in rubles, not dollars, after US authorities prevented US banks from operating it. payment. Moscow has a 30-day grace period to withdraw cash from investors before defaulting, but S&P said that was unlikely to happen. “At the moment we do not expect investors to be able to convert these payments into rubles in dollars equivalent to the amounts originally due or that the government will convert these payments into a 30-day grace period,” S&P said in a note. “Sanctions in Russia are likely to increase further in the coming weeks, hampering Russia’s willingness and technical capacity to meet the terms and conditions of its obligations to foreign debtors,” he added. The United States last week imposed tougher sanctions on Sberbank, Russia’s largest financial institution, and Alfa-Bank, the country’s largest private bank, barring lenders from doing business with US institutions or individuals. It also banned any new US investment in Russia. The EU also approved a fifth package of sanctions late last week, including a ban on Russian coal imports. A default is considered selective when it affects some international repayments but not others. Russia has said that any bankruptcy – if it happens – would be “artificial” as it is able to pay, but if its foreign exchange reserves remained sanctioned, it would make payments in rubles. The rating agency Fitch warned last month that an attempt to make interest-bearing payments in dollars in Russian currency would indicate “that a default or bankruptcy-like process has begun.” Additional report by Valentina Romei in London
