17 August 1998 year
The Russian government declared a technical default, refusing to pay its debts and allowing the ruble to float freely.
The preconditions for the crisis had been brewing for several years. They were primarily triggered by the state budget deficit, which, after the collapse of the Soviet Union, reached up to 20 percent.
In an attempt to plug this gap, the government began borrowing from its own population, inventing short-term government bonds. (GKO).
To get Russians to spend their money, they were promised incredibly high dividends: from 20 to 150 percent per annumThe funds raised were planned to be invested in economic development, but in reality, everything turned into a typical financial pyramid: to pay off old investors, new money had to be attracted.
Moreover, the government spent enormous sums to maintain an artificial exchange rate for the ruble, causing gold and foreign exchange reserves to dwindle before their eyes. Yeltsin had been offered the opportunity to let the ruble float freely long before the crisis, but a stable exchange rate was one of the few achievements of the new government, and it clung to it to the very end.
There will be no devaluation. I state this firmly and clearly. And I'm not just making this up or fantasizing... It's all been calculated. (Russian President Boris Yeltsin three days before the default)
The final straw was the collapse of prices for the main source of the Russian economy: the price of oil fell from $20 to $10 per barrel.
On the eve of the next payment of debts on state short-term bonds to the Prime Minister To Sergei Kiriyenko They reported that the country does not have money for this.
There were two options: print new money or declare bankruptcy.
In less than a month after the default was announced, the dollar exchange rate jumped from 6 to 21 rubles. Banks stopped issuing cash and processing payments, and company shares and household ruble savings depreciated.
The inflation rate for the year exceeded 80 percent, and the number of unemployed doubled.
However, just six months later, economic indicators turned into a major recovery, fueled by increased competition and rising oil prices.
