During Russia’s 1998 financial crisis, the Russian ruble was sharply devalued after the government defaulted on domestic debt. On August 17, 1998, Russia widened the ruble’s trading band, announced a temporary moratorium on some private foreign debt payments, and restructured government securities.
The crisis followed years of fiscal pressure, weak tax collection, low commodity prices, and heavy reliance on short-term government debt. Investors became increasingly unwilling to roll over that debt, while Russia’s reserves were strained by efforts to defend the currency. The Asian financial crisis and the collapse of the hedge fund Long-Term Capital Management added to global financial stress.
The ruble’s value dropped steeply, inflation surged, and Russian banks suffered severe distress. The episode was not simply a stock-market crash: it combined sovereign default, currency devaluation, and banking disruption. Russia later benefited from higher oil prices and improved fiscal conditions, but the 1998 crisis became a major turning point in its post-Soviet economic history.