Russia declared a debt default and devalued the ruble on August 17, 1998, during the 1998 Russian financial crisis.
The announcement included a restructuring of domestic ruble-denominated debt, a widening of the ruble’s trading band, and a temporary suspension of some foreign-debt payments. The measures amounted to a default on domestic government debt and marked a dramatic breakdown in Russia’s attempt to defend its currency and finance its obligations.
Russia entered the crisis with weak tax collection, a large fiscal deficit, political uncertainty, and heavy dependence on short-term government borrowing. Falling commodity prices also reduced export revenues. Investors became increasingly unwilling to roll over the government’s debt, while pressure on the ruble intensified.
The consequences spread beyond Russia. Global investors reduced risk, emerging-market assets fell, and Long-Term Capital Management suffered heavy losses on positions that depended on normal market relationships. The crisis also helped expose how quickly a sovereign default in one major emerging market could affect banks, hedge funds, and markets worldwide.