Russia’s 1998 default and devaluation triggered the Russian financial crisis.
On August 17, 1998, Russia devalued the ruble, declared a moratorium on some foreign debt payments, and restructured domestic government debt. The government had struggled with falling tax revenues, large fiscal deficits, and pressure on its exchange-rate band. The Asian financial crisis had also reduced investor appetite for emerging markets and weakened commodity prices.
The announcement caused severe losses in Russian financial markets and contributed to banking failures. International investors reassessed risks across emerging economies. The collapse of the hedge fund Long-Term Capital Management soon afterward illustrated how shocks could spread through highly leveraged global financial networks, although its failure had several causes.
Russia’s economy later recovered as oil prices improved and the ruble stabilized. The 1998 episode should not be confused with the 1997 Asian financial crisis, which began in Thailand and involved different immediate triggers.