Russia’s 1998 debt default and devaluation triggered a major emerging-market stock sell-off.
On August 17, 1998, Russia devalued the ruble, declared a moratorium on some foreign debt payments, and restructured domestic government debt. The measures followed years of fiscal pressure, weak commodity prices, political uncertainty, and costly efforts to defend the ruble’s exchange-rate band.
The crisis damaged confidence in emerging markets and contributed to severe stress at Long-Term Capital Management, a highly leveraged U.S. hedge fund. The Federal Reserve helped arrange a private-sector recapitalization of LTCM, although it did not provide a taxpayer-funded bailout.
Russia’s crisis is often mixed up with the 1997 Asian financial crisis. They were connected through global investor sentiment, but Russia’s default and ruble devaluation occurred in 1998 and had distinct domestic causes.