Which financial crisis followed Russia’s default on domestic debt in August 1998?

Russia’s default on domestic debt in August 1998 was followed by the Russian financial crisis.

On August 17, 1998, Russia devalued the ruble, declared a moratorium on some foreign debt payments, and effectively defaulted on domestic government debt. The announcement shocked investors who had expected continued support for the ruble and Russian government securities.

The crisis grew from falling commodity prices, weak tax collection, large budget deficits, political uncertainty, and heavy reliance on short-term government debt. As confidence disappeared, the government struggled to refinance obligations and defend the currency.

The turmoil spread beyond Russia. The hedge fund Long-Term Capital Management suffered enormous losses because of leveraged positions, and the Federal Reserve helped organize a private-sector rescue to limit broader financial disruption. Russia later benefited from stronger oil prices and improved fiscal conditions, but the 1998 episode caused severe inflation and banking-sector damage.