Gita Gopinath, deputy director of the International Monetary Fund (IMF), said global economies may reconsider the safety of holding USD foreign exchange.
The statement came after half of Russia's gold and foreign exchange reserves were frozen by international financial institutions amid sanctions against Moscow for Russia's military campaign in Ukraine.
We may see some countries reconsider their holdings of certain currencies in foreign exchange reserves, Gita Gopinath said in an interview with Foreign Policy magazine.
Ms. Gopinath said the IMF considers the "increasingly sluggishness" in global payment systems to be one of the consequences of the current events. However, she said the US dollar, traditionally considered a world reserve currency, is unlikely to collise immediately. However, depending on how long the crisis in Ukraine lasts, there may be greater impacts, according to Gopinath.
Referring to the prospect of Russia falling into national debt, a senior IMF official said its potential impact on the global economy would not be large and would not pose systemic risks, because the figures we are considering are relatively small if viewed globally. However, for Russia, a bankruptcy will have long-term consequences, Gopinath said. "When we are out of debt, reentering the market is not easy. And that could take a long time, said the IMF deputy director.
Sanctions against Russia this month include removing Moscow from the Western financial system, banning most transactions except debt repayment and oil purchases, at least for now.
The sanctions also include freezing about $300 billion that Russia currently holds in foreign currency reserves. International credit rating agencies lowered Russia's rating to the pre-defit level earlier this month, predicting that Moscow would not be able to fulfill its obligations to foreign creditors.
However, so far, Russia has prevented the situation of bankruptcy, paying an interest of $117 million to two USD-issued bonds last week. Media reports also said that Russia had paid another $66 million debt on March 22.
Russia has repeatedly claimed to be fully capable of repaying the debt and may even repay the debt in rubles if there is no other choice.
However, according to Moody's Investors Services, Russia is still at risk of bankruptcy, as sanctions on Russian debts will expire on May 25, while Moscow still has payments worth $100 million due on May 27.
Russia accused the US and its allies of trying to create an artificial bankruptcy, because the country has money to repay the debt. Moscow says Western financial institutions are falling into bankruptcy, because by freezing Russian assets, they are failing to fulfill their obligations.
