Russia announced its 1998 sovereign debt default on August 17, 1998.
The announcement included a devaluation of the ruble and a 90-day moratorium on some foreign debt payments by private borrowers. Russia had been under pressure from low oil prices, weak tax collection, political instability, and the cost of defending the ruble’s exchange-rate band.
The crisis severely damaged confidence in Russian financial markets. The ruble lost much of its value, banks failed or suffered major stress, and inflation accelerated. The turmoil also contributed to the collapse of Long-Term Capital Management, a large U.S. hedge fund whose highly leveraged positions were exposed to market dislocations.
The announcement is sometimes described simply as a ruble crisis, but the event combined currency devaluation, sovereign debt problems, and banking-sector distress. Russia later benefited from higher oil prices and economic changes, and its recovery began after the ruble’s sharp decline made domestic production more competitive.