Russia’s 1998 debt default and ruble devaluation followed the Russian stock-market crash.
On August 17, 1998, the Russian government and central bank announced a restructuring of domestic ruble-denominated debt, a temporary moratorium on some foreign debt payments, and a widening of the ruble’s trading band. The measures were widely described as a default and devaluation crisis.
The Russian stock market had already fallen dramatically during 1998. Weak tax collection, large budget deficits, falling commodity prices, and the aftereffects of the Asian financial crisis placed heavy pressure on the government’s finances. Russia had also been defending the ruble while holding limited reserves.
The crisis caused bank failures and severe economic disruption. It also contributed to the collapse of Long-Term Capital Management in the United States, whose highly leveraged positions were endangered by the sudden market turmoil. The Russian crisis is distinct from the 1997 Asian financial crisis, although the two were connected through global capital flows.