Despite this, S&P downgraded Moscow to selective default,’ warning that the nation is unlikely to meet its foreign debt obligations. Since its war with Ukraine, Russia has added $3.4 billion in fresh oil and gas earnings to the fund that cushions its sanctions-hit economy as it moves closer to its first debt default since 1998.
On Sunday, Moscow said it would contribute Rbs273.4 billion ($3.4 billion) to its rainy day fund; Rbs271.6 billion come from oil and gas profits received in the first quarter of this year.
According to the administration, the extra funds would be used to “take measures aimed at ensuring economic stability in the context of foreign sanctions,” according to the administration. According to analysts’ consensus projections, the Russian economy will decline by 10% this year. Despite this, profits from commodity exports and strict capital controls have helped Moscow stabilize its currency and avoid a financial meltdown in the face of heavy economic sanctions imposed by the West and its allies.
Russian Economy’s Dependency on Fuel
So far, oil and gas income has bolstered Russia’s economy, as have strict capital controls that prevent most foreign traders from liquidating their positions.
S&P Global Ratings, on the other hand, downgraded Russia’s credit rating to “selective default” this weekend after Moscow stated that it will pay the current tranche of its foreign debts in roubles rather than dollars. Since the beginning of the invasion, Russia has made timely payments on its dollar bonds; it defied many investors’ concerns that western sanctions and Russian currency controls would force the nation into its first foreign currency debt default since 1998.
However, Moscow should make an $84 million coupon payment and a $552 million repayment of a maturing bond last week. After US officials stopped the transfer, it proposed payment in roubles rather than dollars.