Russia’s 1998 debt default intensified the global market turmoil known as the Russian financial crisis.
On August 17, 1998, the Russian government devalued the ruble, declared a moratorium on some foreign debt payments, and restructured domestic ruble debt. The measures shocked investors and weakened confidence in emerging markets.
Russia faced falling oil and commodity revenues, large fiscal deficits, political instability, and pressure on its currency. The crisis damaged banks and businesses, while the ruble lost much of its value. International investors reduced exposure to other emerging economies as they reassessed risk.
The turmoil also contributed to the failure of Long-Term Capital Management, a large U.S. hedge fund that had used highly leveraged trading strategies. The Federal Reserve helped coordinate a private-sector recapitalization, although it did not directly bail out the fund. Russia later benefited from higher oil prices and fiscal improvements, but the 1998 crisis caused a severe short-term economic shock.