Russian official warns a banking crisis is possible amid nonpayments. ‘I don’t want to think about a continuation of the war or an escalation’
As Moscow’s war against Ukraine nears the end of its fourth full year, Russia’s financial system is reportedly coming under further pressure.
The White House plans to revive peace talks with Ukrainian President Volodymyr Zelensky this weekend, as he is due to meet with President Donald Trump in Florida on Sunday. Russian forces increased their bombardments against Ukraine before the meeting, but long-term conflicts pose a risk to the economy.
“Banking crisis is possible” Russian official told Washington Post soon on condition of anonymity. “A non-payment crisis is possible. I don’t want to think about the continuation or escalation of the war.”
Russia’s economy has been surprisingly resilient in the face of harsh Western sanctions after President Vladimir Putin launched an invasion of Ukraine in early 2022. This comes at a time when China and India are eager to grab cheap Russian oil, keeping the Kremlin’s coffers full and providing revenue for its military.
However, recently, as Europe and the USA tightened sanctions, energy prices have also fallen. Oil and natural gas revenues fell 22 percent in the first 11 months of the year. Reuters December revenues are estimated to fall by almost 50%.
To close the gap in energy income, Moscow took advantage of the national wealth fund. But this is now running out, so the government has resorted to generating more revenue through tax increases.
Meanwhile, the tight labor market and high inflation have forced the central bank to keep interest rates high, and recent easing has failed to prevent spending declines across several categories of consumers.
As companies feel the pressure from high interest rates and weak consumption, Russian data shows unpaid wages nearly tripled from a year ago to more than $27 million in October. to mail He adds that furloughs and shorter work weeks are also becoming more common.
As a result, more consumers are having trouble paying off their loans. Given the headwinds, the Russian official’s warning of a banking or default crisis is not the first of its kind.
In June, Russian banks raised red flags. potential debt crisis Because high interest rates negatively affect borrowers’ ability to pay loans. Also that month, the head of the Russian Union of Industrialists and Entrepreneurs warned that many companies were in a “pre-default situation.”
And in September, Sberbank CEO German Gref, one of Russia’s top banking chiefs, said: Economy was in “technical recession” Following warnings in July and August that growth was close to zero.
