What 1998 event forced Russia to devalue the ruble and default on domestic debt during a global market crisis?

The Russian financial crisis of 1998 forced Russia to devalue the ruble and default on domestic debt during a global market crisis.

Russia announced the devaluation and debt default on August 17, 1998. The government also widened the ruble’s trading band and imposed a temporary moratorium on some foreign debt payments. The measures followed years of fiscal weakness, falling tax receipts, political uncertainty, and pressure from the Asian financial crisis.

Investors had purchased Russian government securities partly because of their high yields. As confidence deteriorated, capital left the country and refinancing became increasingly difficult. The ruble then lost much of its value, worsening inflation and financial distress.

The crisis had international consequences. The collapse of the hedge fund Long-Term Capital Management soon afterward raised fears about wider financial contagion, although it was not simply a Russian government institution. The episode is distinct from Russia’s 1992 transition crisis and its later 2008 market shock.