S&P lowers Russia’s credit rating, the country is one step closer to insolvency – Economy

Russia paid off its dollar-denominated debt in rubles this week.

Credit rating agency Standard & Poor’s (S&P) has downgraded Russia’s foreign currency credit rating, news agency Reuters says. Lowering the currency rating means that Russia is once again one step closer to insolvency.

The rating dropped from CC to SD. CC means that the repayment of the debt is very uncertain. The SD level means that the debtor is unable to pay certain parts of his debt.

Russia is this week paid dollar-denominated government debt in rubles and, according to S&P, thus knowingly failed to fulfill its obligations. According to the credit rating agency, Russia’s reluctance to comply with these obligations is likely to increase further if the economic sanctions imposed on it are tightened. Russia ended up under severe economic sanctions after attacking Ukraine on 24 February.

“We do not expect investors to be able to convert these rubles into dollars and match the payments that were originally due,” the S&P press release says.

Russian Minister of Finance Anton Siluanov said Reuters said the country would do everything it could to pay its creditors on Thursday. The country is going to however will continue to pay debts in rubles as long as its foreign exchange reserves are frozen due to sanctions.

Read more: Russia paid its giant dollar debts in rubles because it was, in its words, “forced” – now the country is drifting back into insolvency

The U.S. Treasury Department said Monday it will not allow Russia to pay dollar-denominated government loans from the frozen funds. Until now, the ministry has allowed Russia to pay interest on government bonds with its frozen funds on a case-by-case basis.

Russian government bonds matured on Monday. If Russia slips off payments on loans, it will be declared insolvent.

In practice, Russia has a 30-day grace period to make payments. If no interest is paid during that period, Russia will be considered insolvent in respect of its foreign currency loans.

By Editor

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