After the USSR ceased to exist, Russiaalmost always experienced financial problems. The state was in dire need of foreign financing, while it could not guarantee the servicing of foreign debt. As a result of the huge amount of not only external, but also internal loans, a large public debt has been formed. This is what caused the world-famous event that went down in history as the “black Thursday” of 1998.
Building public debt, or how it all began
According to the information provided by the Central BankThe Russian Federation, at the time of the crisis, the country's ZRV corresponded to 24 billion dollars. At the same time, debt to non-residents of the GKO / OFZ market and the stock market was $ 36 billion. The average size of annual debt to non-residents was approaching the figure of $ 10 billion a year. The situation was aggravated by a sharp drop in the cost of raw materials on the international market. The decline affected oil, gas and metals. At the same time, the global financial crisis began in Asia. Russia's foreign exchange earnings declined several times, the dollar rate in 1998 updated its maximum, and foreign creditors began to experience strong doubts and concerns in terms of providing financial support to a state with an unstable economic situation.
Negative sentiment: it all started in July
Несмотря на критическое положение дел в стране, The “black Thursday” of 1998 brought closer the speech of Michel Camdessus, who at that time was the executive director of the IMF. Because of his words that even with all the conditions of the IMF Russia, the fund will not be able to issue a loan in the amount of 15 billion dollars, which the state requested, anxiety about the devaluation of the national currency became particularly acute.
Already on July 7, the Central Bank of the Russian Federation completely stopped issuingfinancial institutions loans of the Lombard type. On July 9, negotiations took place, according to the results of which the state had every chance to receive a loan in the amount of $ 22.6 billion. The next day, the UN declared that the devaluation of the ruble could bring the country unprecedented benefits, and it is a phenomenon essential for the economy.
Mock mood change
The events that took place in the country at the endJuly, gave hope that the default 1998 may not take place. So, on the 29th, the state was allocated the first tranche of emergency loans of an emergency type. Its size was about 14 billion dollars. The threat of devaluation has receded. On the 24th of the same month, the Central Bank refinancing rate was lowered to 60%. The positive mood was slightly changed by the speech of Andrei Illarionov, who holds the post of director of the economic institute. He officially criticized the policy of the government of the country and insisted on speeding up the devaluation of the national currency.
The events of August 1998 - the approach of the crisis
The crisis of 1998 in Russia began to worsenafter a lull on August 5, when the government asked the government to increase the borrowing limit from $ 6 billion to $ 14. This decision clearly indicated that the country was simply unable to finance its budget from domestic sources.
Уже 6 августа государству был выдан третий транш for the reconstruction of the economy in the amount of 1.5 billion dollars. Russian debt on the world market fell to their lowest levels. Black Thursday 1998 was getting closer and closer.
The gradual collapse of the economy
Неизбежное обрушение котировок российских бумаг It took place on August 11th. Shares on the RTS dropped 7.5% over the day. This is what caused the stop of trading. During the day, banks continued to buy foreign currency non-stop. In the evening of the same day, when the 1998 dollar rate reached its peak, most of the country's largest banks stopped all their operations.
August 12, a sharp interest in the currency becameprerequisite to a complete stop of the interbank credit market. A liquidity crisis has begun. Banks that needed large amounts of funds to fulfill their obligations under forward contracts faced difficulties in repaying loans. The Central Bank initiated the reduction of limits on the sale of foreign currency to the largest commercial banks, which significantly reduced its costs of maintaining the ruble exchange rate. The agencies Moody`s and Standard & Poor`s on August 13 announced a sharp decrease in the long-term credit rating of the state. The Minister of Finance and the Deputy Director of the Central Bank reported in the press that the currency market and the government bond market from now on will be supported by the bankers themselves. On August 14, it was possible to see on the streets near the banks whole lines of depositors who tried to recover their funds.
Black Thursday 1998
Black spot on the history of Russia called“Black Thursday” meant the technical default of the country, its inability to pay for its obligations - neither external nor internal. On August 17, after the speech of Sergei Kiriyenko, who holds the post of head of government, it became clear that the devaluation took place. He spoke of measures aimed at stabilizing and normalizing both financial and budgetary policies.
For 90 days the execution was suspendedliabilities to foreign citizens on loans, on transactions in the derivatives market and on mortgage manipulations. The GKO trade was completely stopped. Russia switched to a floating exchange rate. After the expansion of the corridor from 6 to 9.3 rubles per dollar, the government was not in a position to control the situation. The 1998 dollar exchange rate in just two months has increased several times and already in October amounted to 15.9 rubles per dollar compared to 6 rubles at the beginning of the summer of 1998.
What happened in the country after defaulting?
After the default of 1998 was officiallyannounced, the banks immediately ceased to issue deposits. The situation was explained by the fact that liabilities of financial institutions were expressed in dollars, and assets - in rubles. If you start issuing deposits in the presence of devaluation, holes will form in the balance sheet, which can jeopardize the entire banking system of the state.
International organization Visa Int.Blocked acceptance of cards of the country's largest bank, Imperial. All other financial institutions were advised to refrain from issuing cash on cards. The high dollar rate in 1998 became the basis for a ban on establishing the difference between buying and selling a currency of more than 15%. There was a natural selection of financial institutions, only the strongest remained. A rejection of the introduction of temporary administrations was given. Lending to financial administrations took place on the terms that they transferred packages of shares to the government. Then there was a decree on the removal of powers from the cabinet of ministers and on the removal of the head of state from affairs.
Financial losses
A real challenge and new perspectives1998 was remembered by many residents of the country. The default in Russia caused a loss of only 96 billion dollars in August. Corporate sector losses amounted to at least $ 19 billion. Commercial financial institutions suffered losses in the amount of $ 45 billion. Many experts in the financial world tend to believe that these figures are very understated.
GDP fell to 150 billion dollars.The status of the largest world debtor was hung on Russia in August 1998. The ruble practically depreciated, and the size of the external debt at the same time amounted to no less than 220 billion dollars. This amount corresponded to 147% of GDP. External debt is not the only thing brought in 1998. The default in Russia has caused domestic debt. General obligations of the state to the citizens of the country amounted to 300 billion dollars, which corresponded to 200% of GDP. In the west, concentrated about 1.2 trillion dollars, but according to unofficial data from America. A big plus that the country received after “Black Thursday” is a complete abandonment of the economy according to the raw material model and the active development of almost all segments of the business where imports were before the crisis.
