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See what "Default in Russia (1998)" is in other dictionaries. See what "Default in Russia (1998)" is in other dictionaries Since 1998

The economic crisis is a very unpleasant and extremely dangerous phenomenon for any country. The collapse of the economy led to the death of more than one power back in the days of the Ancient World, and even today the risk of something like this always persists.

The collapse of the USSR, for example, was largely predetermined by the policy of its leadership, which at first allowed the emergence of dependence on oil imports, and then failed to take adequate measures when the cost of raw materials on world markets (due to the UAE) went down sharply.

The remnants of the country were in a fever for a long time, but the event that almost put an end to the history of modern Russia was the 1998 crisis. However, in those years, not only the domestic economy had a hard time, since stagnation was growing all over the world. But it was our country that went through the most difficult incident.

Prerequisites for problems

The crisis phenomena accumulated constantly, but not too noticeably. It all started back in the 70s, in the days of the USSR. First, a far from the best scheme of countering inflation was chosen, when, in order to achieve this goal, the government artificially limited the volume of money supply in circulation.

This stopped inflation weakly, but led to a sharp shortage of cash. By 1998, monetization was no more than 10%, while in countries with normal economies this figure reached no less than 75%. The number of non-payments grew, and the domestic debt grew at an unrealistic rate.

The government tried to deal with some crisis phenomena, but all measures were limited to raising tax rates, increasing rent and tariffs, and the real collection of this money fell more and more every year. Almost 80% of enterprises in those years actively used shadow work schemes, and the remaining 20% almost openly operated under criminal tax evasion schemes.

The number of firms offering services for cashing money obtained through illegal means has increased hundreds of times. Of course, the state lost huge sums from this, but many members of the highest power structures participated in fraud, and therefore businessmen got away with any financial (and not only) crimes.

Exchange rate, external debt

In addition, one should not forget about the unfair division of the USSR, which left today's Russia the entire volume of external debt that all the former republics of the USSR had accumulated. Payments on it were constantly growing, and new ones were also accumulating.

At that time, they tried to support the ruble artificially, which led to an inadequate ratio of prices for imported and domestic goods. Thus, the prices for imported products were so low that even the remaining developed enterprises were at risk of ruin, as they could not withstand the competition. At that time, approximately 60% of the country's food needs began to be met from foreign products, which already directly contradicted the interests of the state.

Inflation

By the end of 1998, inflation rates were dozens of times higher than those for 1993. Economists believe that approximately from 1995 to 1996. the government had virtually no control over this process. It is not surprising that in such conditions only the raw-material sector of the economy could develop, since all more or less science-intensive enterprises were simply doomed to extinction.

Despite the fact that in the first years after the collapse of the USSR, Western investors had their own interests, and they offered good conditions for financial assistance, by the end of the 90s there was a stalemate when their enterprises were almost completely killed, and “abroad did not help us "Because businessmen did not want to invest in a knowingly losing business. The fact that many joint projects were canceled due to the fact that the allocated funds simply disappeared played a negative role.

Main factors contributing to the development of the crisis

A huge amount of "deferred inflation". Its total sums were such that the state was simply physically unable to pay for them, without lowering the standard of living of the entire country as a whole.
An insignificant share of savings. Real funds were spent on meeting immediate needs, so that there was practically nothing left for future generations.
The stock market was dominated by speculators. However, the very nature of the "economy" at that time was precisely speculative, and the specialists thought only about making short-term profits. It got to the point that factories and state enterprises, the value of which even at that time was equal to millions of dollars, were sold literally at the price of real estate or scrap metal.
State production was completely forgotten and abandoned, there were not even any adequate projects for its restoration, not to mention any real steps towards this.
Fiscal policy was also based on trying to get at least some money from the last remaining enterprises, until production finally stopped.

Of course, the 1998 crisis was not least due to the global fall in energy prices and other negative factors, but all of them only contributed to the inevitable collapse of the system, which was actually built by inexperienced economists who were unable to draw up a working annual budget for the country and promote the adoption of effective laws in this area.

Who and how provoked the immediate start of the crisis?

However, it would be naive to assume that the 1998 crisis happened on its own, without the participation of interested parties. It began with the direct knowledge and consent of the then Russian government.

The reasons for this decision were simple. Economists tried to solve several problems at once, to cut a kind of Gordian knot, if you like:

Another attempt was made to devalue the ruble.
It was assumed that this would increase tax revenues to the treasury.
To ease the situation of domestic banks by freezing the accounts of their foreign creditors.

These projects were largely due to the fact that complete confusion reigned in the government: the Duma consisted of the overwhelming majority of communists. They constantly blocked the initiatives of the liberal government, which also did not remain in debt, vetoing the initiatives of their enemies. As a result, it turned out that everyone was on the losing side. Especially ordinary citizens of the state.

So how did the 1998 financial crisis begin?

Chronology of all previous events

So that you can finally be imbued with everything that happened at that time, we offer you a complete chronology of events that ultimately led not only to the crisis of the late nineties, but also predetermined the development of the economy of our country for many years to come.

Firstly, “Black Tuesday” of 1994, when it was decided to finally curtail lending to the budget deficit, which at that time turned out to be really necessary. But for the normal functioning of the state, after this harsh and not very popular measure, it was required to establish a normal collection of taxes and obtain profitable investments (although they should also be abandoned), but they did not do any of this.

The constant decline in living standards led to threatening drops in tax collections, and investors were not at all eager to contribute their money to dubious projects. In principle, this alone was enough to spark the 1998 financial crisis in Russia. But there were other reasons as well.

In 1995 and 1996. there was a real peak in the use of Treasury bonds. Purely theoretically, they were equated to normal money, only in practice they were real currency surrogates. Naturally, this policy did not suit business and state producers in any way, and therefore the general stagnation and regression in the economy only continued.

Instead of helping to ease working conditions for small and medium-sized businesses, the government has decided to dramatically increase tax collection. This solution, as you might guess, turned out to be not very effective. All this led to the fact that the economic crisis in Russia (1998 is just an official starting point) began long before external manifestations.

In the middle of the same year, reformers came to the government, headed by Nemtsov and Chubais, whose activities immediately began with a budget cut by a third. Some of the salary debts were eliminated, but as a result, the total financial debt of the state as a whole only increased, since there was simply nowhere to take money to cover its obligations. Problems began to accumulate at a record speed, and the real danger of a popular revolt was growing. These were the reasons for the 1998 crisis.

Loss of trust

This policy quickly bore fruit, which, as expected, did not taste very good. The Duma is rapidly refusing to cooperate with the young reformers, and the IMF mission does not want to provide the next financial tranches without the full repayment of internal debts on utility bills and taxes. No one could really influence the situation at that time, since the real standard of living of the population was falling daily. In fact, it was already the Russian crisis of 1998.

Start

All of the above led to the fact that in May 1998 financial markets began to sink with a crash, the national currency was sharply and irreversibly depreciated. The bankruptcy of Tokobank, in which almost all the capital belonged to Western investors, also played a significant role. The latter did not like it much. The withdrawal of capital after this event accelerated sharply. The 1998 crisis began in Russia.

In addition, the constant debate with the international community over the situation in Chechnya did not contribute to the growth of the credit rating, so that new tranches of financial assistance from the IMF could be forgotten.

They managed to find a way out very quickly: they took a debt from the Europeans, and the interest on it turned out to be several times higher than the already onerous conditions of the IMF. Russia's external debt (even excluding the USSR) has approximately doubled in just one year. The crisis was growing, the dollar rate against the ruble began to rise sharply. So, by August 23, 1998, he was already 1: 7, and did not think to stop. It became clear to everyone that the economic crisis in 1998 would not be limited, and our grandchildren would have to pay.

Domestic debt is skyrocketing (although its size is already alarmingly large). The government once again freezes payments on its obligations, and also prohibits payments on the debts of Western creditors. The situation is getting worse and worse, the 1998 crisis in Russia is rapidly gaining momentum.

All this led to the fact that by the beginning of September the dollar rate increased once again. It began to be 1: 12.8. By September 7, this value was 1:17. Business is in a panic, an uncontrolled sharp rise in prices has begun in the country. By the middle of the month, the exchange rate exceeded 20 rubles for one unit of the American currency.

Correction of the situation

Still, one should not assume that the government was sitting idly by. It began to dawn on everyone that it could not go on like this for long, that the crisis in Russia needed to be completed. 1998 became the season of serious political appointments because of this. In September, a massive reshuffle began in the authorities: the notorious Sergei Shoigu was appointed to the post of Minister of Emergencies, Sergei Stepashin became Minister of the Ministry of Internal Affairs, Igor Ivanov became the head of the Ministry of Foreign Affairs. By the twenty-fifth of September, the active work of the Special Commission began, which tried to eliminate the consequences of the crisis.

In general, they managed to do something. So, by the end of September, the exchange rate nevertheless fell to fifteen rubles per dollar, the situation in the economy became simply bad, but no longer catastrophic. Subsequently, Yeltsin was forced to resign. The cost of oil on international markets went up sharply, the new government began to act in relations with the Americans no longer from the position of the losing side, and the general situation gradually began to improve.

Socio-economic impact

All of the above is just a dry list of facts. So what did the 1998 crisis do to the situation of the country's citizens? As you can imagine, nothing good happened. First, public confidence in the ruble and their own banking system (which is not surprising after 1991) was completely undermined. Many banks went bankrupt, almost all individual entrepreneurs who started doing their business at the dawn of the 90s completely went bankrupt.

In fact, it was already a ready-made financial crisis. 1998 simply became a boiling point, when the artificially supported state machine could no longer function independently.

The banking system was in deep collapse for at least six months. The population lost the rest of their savings, the standard of living fell catastrophically, and the scope of currency speculation jumped to the skies. Oddly enough, but it was the crisis that allowed domestic enterprises to begin their recovery.

The Russian crisis of 1998 was also unusual in that for the first time in history, the state openly defaulted on its domestic debt, effectively abandoning all its social obligations and robbing its own citizens. Due to the fact that almost all large enterprises went bankrupt, a lot of specialists lost their jobs. People were forced to look for the use of their talents in the West, as a result of which the "brain drain" reached values that have already openly threatened Russia's national security.

Positive consequences of a negative phenomenon

The 1998 crisis in Russia and the recession associated with it was relatively quickly replaced by an increase in economic growth. Important changes have also taken place in macroeconomic policy, which have had a positive impact on the state of the entire state as a whole. As soon as some relaxation was made in the tax collection system, domestic business also began to grow. These are the consequences of the 1998 crisis.

Major changes

Let's take a look at the main transformations in the country's politics that have made it possible to achieve such positive results:

First, from now on, economic growth has become a priority.
Secondly, artificial support for the national currency rate turned out to be less important, since the consequences of deferred inflation were much more serious. In general, this is how the most serious causes of the 1998 crisis were eliminated.
Thirdly, it was possible to take real steps to eliminate arrears in the payment of wages, pensions and benefits, which not only led to an increase in the general social mood, but also allowed finally to start collecting taxes and payments. In turn, the overall credit rating increased, and the IMF slightly lowered interest rates.
The state abandoned the policy of large-scale loans, which made it possible to start strengthening its own economy, rather than investing money in providing for foreign banking systems.
The government nevertheless heeded the voice of civic organizations, limiting the growth of tariffs for natural monopolies (although many foreign investors did not like this). All of the above made it possible to restore the trust of citizens to some extent, although the situation was still very far from complete normalization.

The consequences of the crisis in the world

Of course, the world economies have experienced far from all the "charms" of the domestic crisis, but there were certain consequences in the West as well. So, in Europe, the cost of fuel has sharply increased (the United States, thanks to treaties with the UAE, this did not threaten), the growth rates of the economies of even developed countries in this region have significantly slowed down. The 1998 global crisis began. In addition, confidence in the dollar was gradually undermined: the world economic community nevertheless made the final conclusion that the issue of this currency was carried out without any control from the American government.

Oddly enough, but many foreign powers really feared the collapse of Russia, since the 1998 crisis in a country with nuclear weapons and unresolved ethnic conflicts on its territory could lead to completely uncontrollable and truly dire consequences. However, such concern resulted in huge payments on external debt payments, which did not have the best effect on the well-being of the population. The consequences of those events continue to affect the lives of ordinary citizens to this day.

So, precisely as a result of the 1998 crisis, the US dollar became the main means of payment in the country, which looked much better against the background of the national currency constantly changing its rate. The government is trying to fight this to this day. However, the crisis discussed above still had positive consequences. They consisted in the following: the main shortcomings of our economy were revealed and exposed, which are very important to correct for the normal functioning of the entire system.

The collapse of the USSR, which happened in the early 90s of the last century, for some became "the greatest catastrophe", for someone a joyful surprise, but for both of them it turned into an economic collapse. The peak of this disaster happened in August 1998. More precisely, on August 17, when Russia recognized the impossibility of making ends meet and declared its bankruptcy to the whole world. A default (refusal to fulfill obligations) was declared on the main debt obligations.

The country's economy by this time fell into decay. According to economist Yevgeny Yasin, budget revenues fell by 40%. At the same time, the communists, who controlled and opposed the policy of reforms, demanded to increase spending to improve the lives of "ordinary Russians".

The standard of living in the 90s really fell sharply compared to the times of the USSR, some Soviet enterprises went bankrupt, there were wage arrears, unemployment grew, production facilities capable of generating income were, as they said at the time, “seized by bandits” and “ red directors ”, and then overbought by banks. The government gave away state property for next to nothing, in exchange for loans and political loyalty course reforms.

It was not possible to collect taxes even from the VChK (temporary emergency commission), created, as they would now say, by a “successful manager,” and then Deputy Prime Minister. To fulfill social obligations, the government was forced to increase borrowing in the domestic and foreign markets through the sale of government bonds.

The authorities sold GKOs - short-term government bonds, relatively speaking, for 100 rubles, and promised the holders of GKOs in a year to repay the debt by paying 149 rubles for each bond (in mid-1998, the yield on GKOs doubled to 49.2%). Among the holders of T-bills were Russian investors, banks and foreign funds (non-residents). But in the second half of the 90s, this scheme of replenishing the state budget began to falter. Obligations to repay T-bills were piling up, and the flow of real money to the budget was declining.

Several reasons contributed to this. , then the Deputy Minister of Finance, in an interview with Gazeta.Ru named at least three reasons for the crisis: the political confrontation between Yeltsin and the Communist Party of the Russian Federation, the collapse of oil prices, the financial crisis in Southeast Asia.

Because of these events, foreign investors became wary of lending to emerging economies. Or they gave it, but on tougher conditions. By the time the default was announced, non-residents had bought bonds for $ 10 billion. Servicing GKOs became problematic and new loans were attracted, among other things, in order to pay off the previous ones and close the budget deficit. Moreover, the volume of attracting funds from the market was constantly increasing. Thus, the volume of placement of GKO-OFZs increased from 160 billion rubles in 1995 to 502 billion rubles in 1997. A financial pyramid has formed.

In addition, to cover the budget deficit, the government borrowed from the International Monetary Fund, the World Bank and other financial institutions. But on July 3, 1998, executive director Michel Camdessus said that even if Russia fulfilled all the requirements of the fund, he was unlikely to be able to issue the $ 15 billion loan that Russia had requested. However, a week later, the IMF nevertheless agreed on a loan, and for $ 25 billion, so that Western investors would not lose funds previously invested in GKOs.

Burned loans and reserves

In addition, the government tried to fight inflation with rather controversial measures. For example, by keeping the ruble overvalued against the dollar, on which significant funds were spent.

In one of the August reports on the spending of the next tranche of the IMF in $ 4.8 billion, the chairman of the Central Bank said: $ 1 billion went to pay off debts on T-bills, and $ 3.5 billion was spent on maintaining the ruble exchange rate.

As an anti-inflationary measure, a reduction in the money supply was also used, including due to massive non-payment of salaries and pensions, non-fulfillment of obligations under state orders and to budgetary organizations.

As a result, inflation decreased slightly, but money in circulation was getting smaller, investments in the economy did not grow, non-payments between commercial partners began to grow, barter transactions flourished, in which counterparties were paid not with money, but with goods and services.

At the same time, the government liberalized international currency transactions, which led to an outflow of capital from the country and increased external pressure on the Russian ruble.

The economy has taken a "floating rate"

The authorities nevertheless promised that there would be no devaluation. On August 14, the President made an epoch-making statement on this topic: “There will be no devaluation of the ruble. It's solid and clear. " He substantiated his position:

“My statement is not just my fantasy, and not because I would not want devaluation. My statement is based on the fact that everything is calculated. Position tracking work is carried out every day. The situation is completely controlled. "

But three days later, the government announced that it was suspending the fulfillment of obligations to non-residents on loans, transactions in the derivatives market and on pledge operations for 90 days. The purchase and sale of T-bills has ceased.

At the same time, it was announced that it would not be able to maintain a stable ruble against the US dollar. The Central Bank introduced a "floating rate" of the ruble, while expanding the boundaries of the currency corridor from 6 rubles. up to 9.5 rubles. for the dollar.

There was no word "default" in the government's statement, but the economy went into a steep dive. By the end of 1998, the ruble exchange rate fell more than 3 times - from 6 rubles per dollar to 21 rubles per dollar.

Soon after the default, Prime Minister and Head Sergei Dubinin was dismissed. The new prime minister was approved, and the head of the Central Bank -.

The default was a hard landing. And the government understood this. It was a blow to the country's image. From an interview with Gazeta.Ru, the then deputy chairman of the Central Bank, it follows that alternative options for combating the budget deficit and covering debt to holders of GKOs were also discussed.

The Central Bank in 1998 could turn on the printing press and dilute the national debt.

But this option was abandoned. Although, according to Oleg Vyugin, it was discussed on the night of August 17-18. We came to the conclusion that the hyperinflation that would inevitably follow the injection of additional money supply is the worst of evils.

The ghost of default on the horizon

From the standpoint of today, both Vyugin and Aleksashenko confidently declare that the default was the right measure, healed the Russian economy, Western investors returned to the Russian OFZ market a year after the default announced by the authorities.

And in the early 2000s, the price of oil began to grow, and the Russian economy along with it. In 2008, oil collapsed and the Russian economy collapsed with it again.

Citizens and authorities have learned from two crises - 1998 and 2008, participants in those events say. A deposit insurance system was created, allowing to preserve at least a part of citizens' savings. But citizens still cannot shake off a bitter experience. As soon as they hear statements from the high rostrum that everything will be fine, they immediately run to the bank to withdraw the last kopecks from the deposit.

In July, he made a forecast, saying that a repetition of the events of 1997-1998 is possible in Russia. There are similar symptoms, such as rising debt and slowing economic growth. The World Bank also predicted a deterioration in the situation in global markets.

Neither the Kremlin nor the expert community agree with this diagnosis. The press secretary of the President of the Russian Federation said that there is no reason for default. And the economist told Gazeta.Ru that stagnation is now in Russia, and it seems to be protracted, but this means that in such conditions there will be no growth or default.

After the collapse of the USSR, Russia experienced serious financial difficulties. The state needed foreign financing, but at the same time there were problems with guarantees of servicing the external debt. Both internal and external borrowings were made.

The result of this financial policy was excessively large public debt. This subsequently led to the 1998 default. In history, this day is called "Black Thursday".

Default reasons

large public debt;
falling world prices for raw materials;
the political situation in the country;
ineffective measures in relation to the economic system (issuance of state short-term liabilities);
liquidity crisis;
collapse of Asian economies.

Chronology of events

July 9 - negotiations with representatives of the IMF in Moscow ended. Russia had a real chance of receiving $ 22.6 billion within two years.

July 20 - the IMF decided to transfer the first tranche of $ 14 billion to Russia. The possibility of ruble devaluation has decreased.

August 5 - the government made a decision to increase foreign loans this year. This indicates a budget deficit.

August 11 - The cost of Russian securities on the stock exchanges has gone down sharply. Banks are actively buying currency. By evening, many of them suspended operations.

August 12 - due to the growth in demand for foreign currency, the interbank credit market stagnated, and a liquidity crisis began. The Central Bank of the Russian Federation has lowered restrictions on the sale of foreign currency to large banks.

August 13 - A meeting of the Minister of Finance and the Deputy Chairman of the Central Bank with the heads of large Russian banks took place. International rating agencies have lowered the credit rating of Russia to the minimum value.
The government ceased to support the government short-term bond market and it was assumed that bankers would be engaged in this.

August 15 - President Boris Yeltsin urgently returns to Moscow. A meeting was held with the participation of the heads of the Ministry of Finance and the Central Bank, the representative of Russia in international financial organizations. The Prime Minister instructed to develop measures to normalize the situation.

August 17 - Black Thursday. There was a technical default of the country, i.e. recognized its inability to pay for external and internal obligations. The devaluation took place. The ruble has fallen in price by one and a half times against the dollar. Operations with T-bills ceased.
Banks stopped returning deposits.

August 18 - the deputy head of the presidential administration resigned. Imperial Bank cards of the international system Visa Int. were blocked.

August 20 - The Central Bank guarantees the safety of citizens' deposits in all banks. The deputy chairman of the Central Bank announced the refusal to introduce temporary administrations in banks.

August 23 - resignation of S. Kirienko. V. Chernomyrdin was appointed acting chairman of the government.

Consequences of default

Foreign investors, including CSFB, after negotiations with the Russian government, were able to obtain payments on GKOs in the amount of 1% of the debt.

Export positions have strengthened after currency devaluation. Those Russian enterprises that incurred costs in rubles and exported their products became competitive.

The ruble exchange rate strengthened to the indicators of 1996-1997 up to 2005. The use of the overvalued ruble exchange rate as an anti-inflationary measure was found to be ineffective. It began to be shaped by the market.

The economic crisis was the collapse of the authorities' macroeconomic policy, which was pursued from 1992 to 1998. The change of power contributed to an early exit from the crisis.

Monetary regulation has become more lenient. The practice of suspension of social payments and non-fulfillment of obligations under the state order, etc., is a thing of the past.

Budgetary discipline has improved significantly. The financing of the state budget deficit will no longer be carried out through large borrowings. It has become more profitable to invest in the real sector of the economy than in securities. This led to a resumption of growth in production.

Immediately after the default, one of the most effective anti-crisis measures was the regulation of prices for the products of natural monopolies (railway transport, electricity, etc.).

How did the 1998 default affect you, your family?

Default in Russia (1998)

Its consequences have seriously affected the development of the economy and the country as a whole, both negatively and positively. The ruble's exchange rate against the dollar fell more than threefold in six months - from 6 rubles per dollar before the default to 21 rubles per dollar on January 1, 1999. The confidence of the population and foreign investors in Russian banks and the state, as well as in the national currency, was undermined. A large number of small businesses went bankrupt, and many banks collapsed. The banking system was in collapse for at least six months. The population has lost a significant part of their savings, the standard of living has dropped. However, the devaluation of the ruble allowed the Russian economy to become more competitive.

Causes of the crisis from the standpoint of the international economy

In the theory of international economics, the concept of the impossible trinity implies the unattainability of a situation of a fixed exchange rate, free movement of capital and an independent monetary policy. In Russia, the ruble / dollar exchange rate was fixed. Free movement of capital allowed foreign companies to invest in the GKO market. Monetary policy was aimed at curbing inflation. In such a situation, in the presence of an overvalued currency (the real exchange rate of the ruble against the dollar was very high), there is a strong speculative attack on the currency. In the case of Russia, the pressure went through the GKO market with its high rates, which do not correspond to inflation. As a result, declining foreign exchange reserves forced the Government to devalue the currency through default.

Possible crisis scenarios

According to the Russian economist, President of the Energy Policy Institute V.S.Milov, despite the negative impact on the well-being of the population, as a result, the crisis played a favorable role in the country's economic development due, first of all, to a sharp increase in budget discipline in the post-default years.

Literature

"Theory and practice of trading in the stock market", ISBN 5-902360-01-3 - from May 12 to August 18

Notes (edit)

Links

Causes and consequences of the financial crisis in Russia at the end of the 90s (based on the materials of the Interim Commission to Investigate the Causes, Circumstances and Consequences of Decisions of August 17, 1998)

Monetary reforms in Russia
Moscow Russia and Russian empire	1535 (Elena Glinskaya) 1645 (Alexei Mikhailovich's ruble) 1700-1718 (reforms of Peter I) 1769 (notes of Catherine II) 1839-1843 (silver monometallism) 1897 (Witte's gold piece)
the USSR	1922-1924 (Soviet chervonets) 1947 ("post-war") 1961 ("Khrushchev") 1991 ("Pavlovsk")
Russia after 1991	1993 (abandonment of Soviet rubles) 1998 (denomination)

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Hello dear readers of the blog site. Twenty years ago, events took place in our country, which in modern history have been called "Black August 1998".

The default in Russia was an economic shock for most Russians.

Citizens who have survived a severe financial crisis still recall this period with horror. The possibility of a new default continues to scare Russians. After all, what happened once may happen again. But is it?

1998 default

On August 14, 1998, when asked about the possibility, Russian President Boris Yeltsin said: “It won't. No. Firm and clear. " The dollar exchange rate at that time was 6 rubles. 27 kopecks The American currency has never returned to this mark.

Prime Minister Sergei Kiriyenko announced the freeze on payments on T-bills (government short-term bonds) three days after Yeltsin's speech. The central bank stopped supporting the ruble. Starting with a slight decline, the Russian ruble literally collapsed in the last days of August and the first week of September. At its peak (09.09.98), the dollar was worth almost 21 rubles.

The depreciation of the national currency has led to multiple increases in prices, delays in wages, pensions, and social benefits. The gross domestic product fell threefold. Tax collection has decreased, production has fallen. Some large banks went bankrupt, citizens lost their savings.

You can learn more about the causes and consequences of the crisis in our video.

According to estimates of the Moscow Banking Union, losses to the Russian economy in 1998 amounted to about $ 96 billion. Of these, 33 billion were lost by corporations, 45 billion - by banks, 19 billion - by the population.

What is default in simple words

Polls conducted in 1999 showed that two-thirds of our country's residents cannot explain the term "default" and tell what it is in simple words. We will try to fill this gap.

The word is borrowed from the English language - default. It denotes non-fulfillment of obligations, termination of payments, non-payment.

Can default even an ordinary person... To do this, it is enough to delay the payment of the loan or fail to make the monthly payment by bank card.

Initially, the term referred only to loan debt, but with the development of financial instruments, the word acquired a broader meaning. For example, the most common way of raising funds by governments of countries is securities - bonds, bonds. Termination of interest or principal payments on securities is considered a default.

In addition to financial obligations, the term denotes the failure to fulfill any conditions stipulated by the loan agreement or the terms of the issue of securities. So, a mandatory requirement when issuing a loan to a business is the submission of reports to the bank. Failure to provide a balance sheet, profit statement on time is considered a default.

To summarize, there are several definitions for the term. Default is:

Failure to fulfill debt obligations on time.
Insolvency of any entity. The latter can be an individual, a company or a state.
Violation of the conditions for obtaining a loan (credit), issuing securities and other agreements on raising funds.

In the broadest sense, default is understood as violation of any obligations- non-fulfillment of trade agreements, deviation from political, diplomatic agreements. But usually there is a classic interpretation of the term.

Types of default situations

Economists distinguish two types of default - conventional and technical.

Technical default arises from temporary difficulties. The borrower is ready to fulfill his obligations, but at the moment he has some problems.
In the case of individuals, this situation often arises when salaries are delayed. When concluding a loan agreement, employees often tie a monthly payment date to the day they receive their earnings. Late transfer of money leads to a violation of the terms of the loan. However, the flow of funds through a small corrects the situation.
The reasons for a technical default can be employee oversight, payment system failure, unforeseen circumstances. Usually the situation is quickly leveled and has no consequences.
To the usual default cites the debtor's inability to fulfill his obligations. There are no funds to pay the debt, and it is not expected. In simple words, an ordinary default is a situation that is close to bankruptcy, that is, the recognition of the debtor as insolvent in court. Only competent and decisive actions of crisis managers can correct the situation.

corporate;
banking, etc.

A sovereign default is also called a level one default. It affects all citizens of the country and has negative consequences on a global scale.

Reasons for insolvency

The main reason for the default is the imbalance between the debtor's income and expenses. Budget deficit covered by loans and credits. Debt servicing drives up costs even more.

To cover the costs, the debtor attracts new funds, the cost of borrowed money rises. As a result, the subject's debt liabilities grow like a soap bubble that will burst sooner or later.

Budget deficit cause:

irresponsible behavior of the borrower;
falling income;
force majeure circumstances;
economic crisis;
change of the political regime, etc.

Receiving a loan or credit, the debtor is not able to foresee what awaits him in the future:

The loss of a job, transfer to a low-paid position, illness can lead to a financial distortion for an ordinary person.
In the company, the profit decreases due to reduced demand, loss of a part of the market, technological lag behind competitors.
At the state level, the drop in income is expressed in low tax collection due to a decline in production or the departure of taxpayers to the shadow economy. Sometimes, when the political course changes, the government may refuse to pay off old debts.

Consequences of default

The borrower who defaulted loses confidence creditors. Having refused to pay the debts once, it is very difficult to find a new loan. Investment risks are growing, money can only be obtained at high interest rates, which further aggravates the financial situation of the debtor.

At the same time, there are positive aspects when declaring a default. Stopping payments on external debts gives the borrower the opportunity to channel funds for their financial recovery and get out of the crisis... Therefore, at the corporate level, before declaring a debtor bankrupt, crisis managers are sent to a company or organization. The purpose of their work is to restore the borrower's solvency.

Where does sovereign default lead

On the world stage, the obligation to fulfill the signed international treaties was introduced by the Peace of Westphalia in 1648. The country's insolvency leads to especially grave consequences:

The authority of the state and national business is undermined. Cheap loans are no longer available to governments and corporations.
There is a devaluation of the national currency, import goods are becoming more expensive.
If it is heavily dependent on foreign supplies, the purchasing power of money decreases. The population becomes poorer and cannot buy goods in the same quantity.
Lower demand negatively affects industrial production. The sales market is shrinking, costs are growing. The crisis is hitting especially hard on companies operating on imported raw materials. Many corporations go broke.
To keep costs down, businesses cut staff and cut wages, further impoverishing ordinary citizens and increasing growth.
The banking sector is suffering. Investment outflows, inability to receive international aid and depreciation of reserves are destroying the financial system.

With a sovereign default, not only the bankrupt state suffers, but also the creditor countries. The consequence could be a collapse of financial markets and an international economic crisis. As a result, not only the population of the state, which refused to pay the debts, suffers, but also the citizens of other territories.

At the same time, default mobilizes state reserves. Budget funds are spent more efficiently. Lenders are afraid of losing everything and go, agreeing to longer payments or giving up interest.

Weak companies disappear, the strongest survive (natural view). The fall in the exchange rate of the national currency contributes to an increase in the competitiveness of domestic producers. In fact, although painful, but necessary to improve the economy tool.

Lessons from the 1998 crisis

The consequences of the default in Russia in 1998 are still affecting the economy. Some of them are gradually smoothed out, others will influence life in our country for a long time to come.

Which lessons citizens and government have learned from the financial crisis:

The events of those years undermined the people's confidence in the authorities for a long time. It is no secret that at any risk, citizens change their national currency to dollars or euros and take it away. They do not inspire confidence within the country. Citizens prefer to invest money in a business or banking sector than to give it to the government.
Russians began to trust their money to banks more responsibly. High interest rates are not the main motive for choosing a deposit, but rather arouse caution. The established deposit insurance system changed the behavior of depositors and increased the stability of the banking system.
After that, the state avoids borrowing money abroad. Russia now has one of the lowest levels of public debt (about 13%). At the same time, reserves are growing, which makes the economy feel stable. From time to time there are talks about the need to invest in industry and agriculture, but so far the position of the authorities has not changed. Low public debt and growth in reserves remain the priorities of economic policy.
Having abandoned external sources, the government prefers to seek funds for social needs within the country, often neglecting the welfare of its citizens.
State intervention in the country's economy has increased. The government has learned that it is much easier to run SOEs than private businesses. According to recent studies, the share of the public sector in the market is about 70%.

In general, the budgetary policy of the Russian government after the 1998 default is aimed at increasing the country's economic stability.

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