Russia’s government default and ruble devaluation followed the Asian financial crisis in 1998. On August 17, Russia widened the ruble’s trading band, devalued the currency, and announced a 90-day moratorium on some foreign debt payments.
The crisis grew from weak tax collection, large government deficits, falling commodity prices, and heavy reliance on short-term domestic debt known as GKO treasury bills. Political uncertainty and pressure on the ruble made it increasingly difficult for the government to refinance that debt.
The default caused severe losses for Russian banks and investors. It also contributed to the near-collapse of Long-Term Capital Management, a highly leveraged U.S. hedge fund. The Federal Reserve helped coordinate a private-sector rescue to limit wider financial disruption.
Russia later benefited from higher oil prices and improved fiscal conditions. The 1998 episode is distinct from Argentina’s 2001 default, although both involved sovereign debt and currency stress.