The IMF projects that economic conditions in Russia won’t trigger a global financial crisis.
“For now, no,” International Monetary Fund Head Kristalina Georgieva told CBS on Sunday when asked whether Russia’s reeling economic situation could cause a broader market collapse. “When we look at the total exposure of banks to Russia, it is about $120 billion dollars. Not negligent, but definitely not systemically relevant.”
Georgieva acknowledged, however, that Russia may default on its debt obligations, and that the war with Ukraine could have significant consequences beyond Ukraine and Russia.
“In terms of servicing debt obligations, I can say we no longer think of a Russian default as an improbable event. Russia has the money to service its debt, but cannot access it,” said the IMF head. “What we are mostly concerned about are the immediate neighbors of Russia and Ukraine… because they have relations with both Russia and Ukraine more than the rest of the world.”
As a result of the war, the IMF was “inevitably” downgrading growth projections for 2022 and seeking measures which would curb the effects of inflation, rising commodities prices, and refugee outflow impacting countries still reeling from the economic affects of the pandemic.
“For countries that have been fast to recover from the COVID-crisis like the United States, growth is robust,” said Georgieva. “It is those that were falling behind where the impact is more severe…. Because of this outflow of people, the refugee wave in Europe is of the magnitude of what happened in the second World War.”
“What do we have to do when we have to fight inflation? We tighten financial conditions,” added the IMF head.