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Russia says that it made payments to avoid non-payment of debt

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Russia says that it has made overdue payments on its external debt, which could lead to default next week.

Interest payments totaling $650 million are reported to have been made in dollars.

On Friday, the head of the Russian central bank, Elvira Nabiullina told journalists that “there can be no question of default” but acknowledged that there were “difficulties with payments”.

The question arose as to whether Moscow would be in a position to meet its obligations in the run-up to the 4 May deadline.

Payments on the country’s $40 billion in international bonds must be made in the currency initially indicated.

However, Russia has lost access to a large portion of its reserve funds held in foreign banks, because of sanctions imposed by the West and its allies as a result of Russia’s invasion of Ukraine.

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Earlier this month, Moscow suggested meeting its obligations with respect to these ruble bonds which was rejected by Moody’s and other rating agencies.

Credit rating agencies have said that any payments other than dollars would amount to a default, which would have a major impact on the Russian economy, including the capacity to borrow in the future.

Russia’s last failure on the ruble-denominated debt was in 1998 when the country underwent a financial crisis.

It ran out of its foreign currency debt in 1918, after the Bolshevik revolution. At this time, Vladimir Lenin, the revolutionary leader, refused to recognize the debts inherited from the tsarist regime.

A 30-day grace period, following Russia’s initial failure to make payments on two bonds in question, is due to expire on 4 May, by which time investors must have received the money they are owed.

Russia’s woes are expected to rise prior to May 25, when the sanctions rules are expected to change, limiting further whether western agents are allowed to process Russian debt payments.

On Friday, Russia reduced interest rates by 3% in an effort to revive the ailing economy. The main lending rate, which was increased immediately after the invasion, is now 14 percent

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