By Andrea Shalal

WASHINGTON, (Reuters) – Russia could default on its debts following unprecedented sanctions on the invasion of Ukraine. However, that will not cause a financial crisis worldwide, Kristalina Georgieva, International Monetary Fund Managing director, said Sunday.

Georgieva stated that the sanctions placed by the United States, and other democracies had already had a severe impact on the Russian economy. This would cause a recession in the country this year.

She said that the war and sanctions could also have major spillover effects upon neighboring nations that depend on Russia for energy. This had already led to a surge of refugees, a far cry from that experienced during World War Two.

Russia calls its actions in Ukraine a “special operation.”

Georgieva explained that Russia was also restricted in its access to resources and ability to pay its debts. Therefore, a default is no longer considered as unlikely.

She said that a global financial crisis could be triggered by a default like this.

She said that the total exposure of Russian banks was approximately $120 billion. This amount, while significant, is not “systematically relevant”.

Georgieva stated last week that although the IMF had downgraded its prior forecast of 4.4% global economic expansion in 2022 because of war, the overall trajectory was still positive.

According to her, CBS reported that growth was strong in the countries such as the United States which had been quick to recover from COVID-19.

She said that the most significant impact could be seen in driving up commodity prices, inflation and possibly leading to food insecurity and hunger in Africa.