Russia’s 1998 debt default triggered a dramatic collapse in the Moscow stock market and a global hedge-fund crisis.
On August 17, 1998, the Russian government devalued the ruble, declared a moratorium on some private foreign debt payments, and restructured domestic ruble debt. Falling oil prices and weak tax collection had left the state unable to defend its exchange-rate band or meet obligations.
The default shocked international investors and contributed to the near-collapse of Long-Term Capital Management, a highly leveraged hedge fund. The U.S. Federal Reserve helped arrange a private-sector rescue to prevent disorderly liquidation from spreading through financial markets.
Russia eventually stabilized after the ruble’s depreciation and a later rise in commodity prices. The episode is often misdescribed as only a currency crisis; the sovereign debt default was the key action that amplified the market panic.