Russia announced a sovereign default and ruble devaluation during the 1998 financial crisis.
On August 17, 1998, the Russian government and central bank widened the ruble’s trading band, devalued the currency, and declared a 90-day moratorium on some foreign debt payments. The announcement followed years of fiscal weakness, low tax collection, political instability, and dependence on short-term government securities.
The Asian financial crisis and falling commodity prices worsened Russia’s difficulties. Investors became unwilling to keep financing the government, and the collapse of the domestic bond market placed severe pressure on banks. The ruble subsequently lost much of its value.
The crisis also affected global markets. The highly leveraged U.S. hedge fund Long-Term Capital Management suffered major losses, prompting a private-sector rescue arranged with Federal Reserve involvement. Russia’s economy later recovered as higher oil prices and a cheaper ruble supported growth.