On the other hand, the loan of the IMF was now approved and Russia got nearly 23 billion of American dollars with a view to help them avoid a possible financial collapse. As stated before, Russia was in a really difficult financial position during 1997 and 1998. But, the government could not drive away the public disbelief as the ruble continued its free fall and the government and the Central Bank had no more reserves in order to defend the national currency and maintain somehow its value. In May 1998, the situation got even worse. This statement was supported after indications of the stabilization of output, the positive sign of the annual GDP growth and a rather tight monetary policy that was implemented by the Russian government. Any information contained within this essay is intended for educational purposes only. To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser. That raises a big question. OECD Economic Surveys, Russian Federation, March 2000, OECD Publications, Roy Medvedev, Post – Soviet Russia: A Journey Through the Yeltsin Era, 2000, Columbia University Press. S&P Dow Jones Indices LLC. Remembering Russia’s 1998 Financial Crisis (Op-ed) The whole economy fell to pieces all at once. In the summer of 1998 the Finance Ministry could fund only a half of its spending with the help of taxes. The IMF did what had to be done in order for the Russians to escape the crisis. The path that Yeltsin and Russia took from the political crisis of 1991 to the financial crisis of 1998 was one of steep slow climbs and precipitous crevasses. No plagiarism, guaranteed! The IMF provided a loan to a country that definitely needed it. And apparently, the Russian government of Boris Yeltsin did fail in this task. This happened because the majority of the government’s income was going to payments for foreign and domestic debts. The financial crisis in Russia in 2014–2015 was the result of the sharp devaluation of the Russian ruble beginning in the second half of 2014. So, after the fall of the stock market prices and the increase of the export prices in Russia, investors started questioning the situation of the Russian economy and doubting the profitability of their investments. Mexico, 1994/Asian Financial crisis, 1997/Russian Financial Crisis, 1998) and specific date (Black Monday, 1987/Black Wednesday, 1992). But, the Asian financial crisis proved to be really significant for Russia’s economic situation. In fact, the only plan that the Russian government came up with was base on two assumptions. So, many of them stopped investing in Russia as there was significant proof of instability and of a forthcoming crisis. 1 Sutela, P. (1999), ‘The Financial Crisis in Russia’, Helsinki: Bank of Finland, BOFIT p. 233 2 The background of the Economic crisis of 1998 in Russia A little about the features of economic policy 1995-1998. Company Registration No: 4964706. Fields marked with an asterisk (*) are required. This recession had its roots in the Asian crisis of 1997. On the other hand, suppose that the monetary aid was given to Russia in 1997. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! This caused the great strike of workers on the Trans-Siberian railway by blocking it. The causes and consequences of the Russian crisis of 1998 The period 1995 to mid-1997 was boom time for Russia’s financial markets. The IMF did help the Russian Federation at that time but it was late and apart from that the Russian government did not have a plan of how to use the money that they got from the organization. Sorry, preview is currently unavailable. At that time Asia was hit by a financial crisis and this financial crisis affected the expectations of the investors as the export prices increased. It is true that the Russian government has based its whole economic plan on keeping the interest rate relatively low and on attracting a strong capital inflow from investors. It is much more interesting and important for the following analysis to focus on the period from 1996 to 1998 in order to better understand the situation of the Russian federation. But there is no point where we can believe that the Russian government had a plan with a view to escaping the crisis. Financial Crisis Pekka Sutela years to come. In August, the reserves used by the Russian government to keep the exchange rate relatively low were exhausted and as a result the demand for American dollars was increased since the government was failing to keep the exchange rate in a low level. These were the effects of the Asian crisis on Russian economy during the late 1997. Also, the government played an important part in letting the situation getting out of hand. In December 1997, already several months before the actual collapse, the Russian banking sector got confronted with fund withdrawals by depositors. Significant in terms of both its magnitude and its scope, the Asian financial crisis became a global crisis when it spread to the Russian and Brazilian economies. Boris Yeltsin had lost control of the situation long before it reached a crucial point. A decline in confidence in the Russian economy caused investors to sell off their Russian assets, which led to a decline in the value of the Russian ruble and sparked fears of a Russian financial crisis. The Russian ruble crisis had many different causes that contributed to the sudden crisis of confidence, including falling energy prices, heightened geopolitical risks, and increasing demand for the U.S. dollar. The Russian financial crisis and eventual default is often cited as a counterargument to one of the principle MR ideas that a sovereign currency issuer should not be able to go bankrupt.
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