Russia announced a default and ruble devaluation on August 17, 1998, during a major emerging-market crisis.
The Russian government and central bank announced a restructuring of domestic ruble debt, a widening of the ruble’s trading band and a temporary moratorium on some foreign debt payments. The measures marked a dramatic loss of confidence in Russia’s finances and currency.
Russia had been weakened by low tax collection, large fiscal deficits, political uncertainty and falling prices for commodities such as oil. The Asian financial crisis also reduced international investors’ willingness to lend to emerging markets. Russia’s government struggled to maintain its exchange-rate policy while defending the ruble with limited reserves.
The shock spread through global finance. Hedge fund Long-Term Capital Management suffered major losses on positions linked to market relationships that broke down during the turmoil, and it was later stabilized through a private-sector arrangement organized with Federal Reserve involvement. Russia eventually recovered, helped by higher commodity prices and improved fiscal conditions.