The 1998 crisis in the economic sphere (default) is one of the most severe in the entire history of the Russian Federation. The reason for this phenomenon was the huge debt of the state, which arose as a result of the decline in the economies of Asian countries, as well as world prices for raw materials, which were the basis of exports, and Russia's economic policy, including the creation of T-bills.
Before this happened, the IMF allocated a loan of twenty-two million dollars to the Russian Federation, but even state interest payments could not be covered by state revenues.
The 1998 financial crisis fell on August 17th. On this day, the government of the Russian Federation announced the failure to fulfill the loan agreement. This event was unexpected for foreign investors who believed that Russia was a sufficiently strong and prosperous state.
It should be noted that in world history there was no case of declaring a default, which is denominated in national currency. However, in this case there was a default on T-bills, for which income, before the crisis of 1998, amounted to one hundred and forty percent per annum. Usually, in such cases, money began to be printed in other countries , and when the national currency depreciated, debts were paid off. This is exactly the scenario that was awaited by investors who contributed to GKOs from Russia. They determined these deposits by fixing the exchange rate of the national currency against the US dollar.
It should be noted that Russia had several ways out of this situation. Firstly, it was possible to print banknotes, thereby triggering the inflation mechanism. It was also possible to default both on external and internal debt. The Russian Federation chose the latter option for the reason that new inflation was not possible, since in the early nineties there was a similar phenomenon, and non-payment of external debts was unacceptable for Russia.
The 1998 crisis had serious consequences for the development of the economic sector, both negative and positive. So, the standard of living of citizens decreased, many banks and enterprises went bankrupt, the confidence of foreign investors in the banks of Russia, as well as in its national currency fell, the ruble exchange rate fell significantly. However, all these events made it possible for the Russian economy to become competitive; in addition, fiscal discipline increased significantly. The default also allowed Russian industry to gain more power by blocking it from imports and increasing exports.
When the 1998 crisis in Russia was announced, investors began to negotiate with the government of the Russian Federation, but payments made up only one percent of the total debt.
Thus, the default for Russia brought more positive aspects than negative ones. He contributed to the purification of the economy from the elements inhibiting its development, as well as to a more responsible attitude to planning the country's budget . At the same time, small business headed for development in large enterprises. After the default, the light and food industries began to develop rapidly, and consumer demand grew.
It should be said that the result of the crisis is the development of those sectors of the economy that were previously replaced by imports, for example, the production of screwdrivers by leading automobile companies in the state. Also, the 1998 crisis contributed to the fact that foreign companies flowed into the Russian economy, which opened their production in the country, so the stock market began to develop soon, as a result of which Russian companies entered the international market.
Today in Russia there are ups and downs in the economy. There is a possibility that the next possible default will differ on an even larger scale.