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History of sovereign debt defaults

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March 15 (Reuters) – Russia faces its first major foreign debt default since 1917 as Western sanctions in response to its invasion of Ukraine limit its ability to service foreign bonds.

Russia has $117 million in payments due Wednesday on two dollar-denominated Eurobonds. Then the Ministry of Finance has said that it will make the installments in rubles if the sanctions prevent it from paying in dollars, which the markets would consider a default.

Moscow describes its actions in Ukraine as a “special military operation”. It has 15 international bonds with a face value of about $40 billion outstanding. About half of the bonds are held by foreign investors.

Russia’s last major foreign debt default occurred more than a century ago, when the Bolsheviks failed to recognize tsarist debt after the 1917 revolution. In 1998, Russia defaulted on its internal debt.

The cost of insuring Russian debt against default has skyrocketed and Russian credit spreads have widened.

The following charts show statistics from Moody’s Investors Service on countries that have defaulted on their sovereign bonds over the last four decades.

During the COVID-19 crisis in 2020, the sovereign bond impact annual rate shot up to an all-time high of 4.2%, according to Moody’s data. Argentina, Ecuador and Lebanon were some of the nations that defaulted on their sovereign debt that year.

Nicaragua and Ecuador were among the nations that defaulted during the 2008 global financial crisis.

If Russia defaults on its debt, it would not trigger a global financial crisis, International Monetary Fund Managing Director Kristalina Georgieva said on Sunday.

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GRAPH (in Spanish): Countries with differential of 5-year sovereign certificates of deposit https://tmsnrt.rs/3KKROOZ

CHART: Sovereign Bond Defaults https://tmsnrt.rs/3tZGdEN

CHART: Moody’s-rated sovereign bond defaults since 1983 https://tmsnrt.rs/3KJGMto

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(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; edited in Spanish by Carlos Serrano)

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