The country has already missed its deadline on Sunday night where it had to meet the 30-day grace period on interest payments of USD 100 million on two Eurobonds which were originally due on May 27.

Some Taiwanese holders of Russian Eurobonds claimed they hadn’t received their regular interest payments.

Late in May, the Office of Foreign Assets Control (OFAC) of the US Treasury Department essentially prevented Russia from making payments, putting an end to Moscow’s attempts to avert the default.

Although a legal default would primarily be symbolic given that Russia cannot currently borrow abroad and does not need to because of the country’s ample income from oil and gas exports, the stigma would likely drive up its borrowing prices in the future.

Russia, on the other hand, has offered to settle the obligations in roubles, and claims sanctions have frozen its foreign currency reserves kept overseas, calling any default artificial given that it has the funds to pay its debts in full.

In foreign bonds, Russia owes around USD 40 billion. Moscow had roughly USD 640 billion in gold and foreign currency reserves when the conflict started, most of which were kept abroad and frozen.

Once a country defaults, it may be prevented from borrowing from the bond market until the default is resolved and investors once again have faith in the government’s willingness and ability to make payments.

Russia’s access to Western credit markets has already been severed, thus any return to borrowing is already in the distant future.

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When the 30-day grace period for missed coupons on dollar bonds expires, it might be declared defaulting. It would be the country’s first default on foreign debt.

Sri Lanka’s government stated in mid-April that it had stopped repaying its foreign debt to save money for food and fuel imports as the country struggled with a dollar shortage. It prompted officials to impose financial controls and import restrictions.

Carlos de Sousa, a money manager at Vontobel Asset Management in Zurich, said that without an agreement there would be a formal default. He also said that for the markets, Sri Lanka is already de facto in default. So, the price impact of such an event is unlikely to be considerable.

Sri Lanka is going through widespread power cuts, food, medicine & oil shortages, and a depreciating currency, which fuelled protests and pushed Prime Minister Mahinda Rajapaksa to resign.

Last week, his brother, President Gotabaya Rajapaksa, appointed a long-time opponent to run the government, hoping to bring a modicum of stability amid bailout talks with the International Monetary Fund.

On May 16, Prime Minister Ranil Wickremesinghe, who has just been in office for a week, announced that the government intends to sell the national airline and promised to propose a new relief budget.

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