Russian debt defaults are surging, with a quarter of the bond market at risk, while Putin hides in bunkers fixated on his war instead of the economy
Russia’s economy is now shrinking and businesses are having more difficulty keeping up with debt payments; this poses a potentially systemic threat to the country’s bond market.
According to data from the central bank this week, GDP contracted 0.5% year-on-year in the first quarter; That fell well short of growth forecasts of 1.6%, due in part to an increase in the value-added tax the Kremlin pays for its war against Ukraine.
This was despite a series of interest rate cuts by the central bank, which kept borrowing costs relatively high to combat war-related inflation.
More Russian companies are missing debt payments as economic activity slows down and interest rates remain high. There have already been 11 technical defaults in 2024, 24 in 2025, and 11 in the first three months of 2026 alone. accordingly Izvestia.
Sources told the Russian newspaper that about 25% of the bond market is now at risk of default as businesses borrowing at low interest rates are forced to refinance at much higher interest rates.
The volume of debt that needs to be rolled over this year has nearly doubled from last year, according to the report, which cites a source who described the default problem as a systemic trend; This increases pressure on cash flows and increases competition for liquidity.
At the same time, the US-Israeli war against Iran has increased logistics costs for Russian companies and led to further inflation, narrowing the scope for the central bank to lower interest rates further.
Warnings have been made for months. Last June, Russian banks raised red flags. potential debt crisis Because high interest rates put pressure on borrowers’ ability to repay loans. Also that month, the head of the Russian Union of Industrialists and Entrepreneurs warned that many companies were in a “pre-default situation.”
The Center for Macroeconomic Analysis and Short-Term Forecast, a state-backed Russian think tank, said in December that the country could face a banking crisis by October if credit problems worsen and depositors withdraw their funds.
Earlier this year, Russian officials told Putin: Financial crisis may hit in summer In the middle of an inflationary spiral. In fact, statistics in Russia show that non-payment of commercial invoices reached a record high of $109 billion in January.
It’s the economy, stupid
But President Vladimir Putin has been largely absent on the economic front. While berating ministers on television last month shrinking GDP He attended the annual Victory Day parade on Saturday and has been spending less time in public.
Instead, Putin spends more time micromanaging his war in underground bunkers, paranoid about a coup or assassination attempt by Ukrainian drones. sources told Finance Times.
