The Aftermath of the Russian debt crisis

Abstract

In August 1998 the Russian Federation was forced to devalue the rouble and declare a moratorium on its debt servicing.Russia was badly hit by unfavourable external conditions, but the main reason for the crisis was the inability of the fiscal authorities to bring the budget deficit under control.When the rouble was devalued, the Russian Federation was unable to meet its domestic or external obligations.The holders of Russia's domestic debt were forced to accept unfavourable restructuring terms, and now also some holders of the old Soviet debt instruments have accepted a significant reduction in the value of their holdings.However, Russia has been willing and able to honour the debts incurred after the Soviet period.Russia's relations with its creditors and international financial institutions have been quite strained in the aftermath of the crisis, and it remains to be seen whether the recent restructuring deal with London Club creditors will mean Russia's re-entry into the international financial markets.