Which 1998 Russian financial crisis followed the government’s default on domestic ruble debt?

The 1998 Russian financial crisis followed Russia’s August 1998 default on domestic ruble-denominated debt and the devaluation of the ruble. The shock caused severe disruption in Russian financial markets and contributed to the collapse of several banks.

Russia faced falling commodity revenues, weak tax collection, large fiscal deficits, and pressure on its exchange-rate system. The government had used short-term debt to finance its obligations, but investor confidence deteriorated. On August 17, authorities announced a debt moratorium and a wider ruble trading band before the currency was later allowed to depreciate substantially.

The crisis also affected international investors and hedge funds. Long-Term Capital Management, a highly leveraged U.S. hedge fund, suffered heavy losses partly because Russian turmoil disrupted its positions. The Federal Reserve helped organize a private-sector rescue of the fund, but it did not directly bail out Russia. The Russian episode is therefore distinct from the 1997 Asian financial crisis, though the two were linked through global investor sentiment.