The 1998 Russian government default that triggered a major emerging-market sell-off occurred on August 17, 1998.
Russia announced a devaluation of the ruble, a restructuring of domestic ruble debt, and a temporary moratorium on some foreign debt payments on August 17, 1998. The announcement shattered confidence in Russian financial assets and intensified selling across emerging markets.
The crisis followed weak tax collection, falling commodity prices, a costly war in Chechnya, and pressure on Russia’s fixed exchange-rate system. The government had tried to defend the ruble with high interest rates and international assistance, but reserves and investor confidence continued to decline.
The Russian shock also damaged the highly leveraged hedge fund Long-Term Capital Management. Because major banks were exposed to the fund, the Federal Reserve Bank of New York helped coordinate a private-sector rescue in September 1998. Russia’s event is sometimes confused with the 1997 Asian crisis, which began earlier and had different immediate triggers.