1997 year as turning point toward Russia’s economic stability. Major factors influence the onset and success of a speculative attack. Effects of the rise in interest rates. Components fueled the expectations of Russia’s impending devaluation and default.
Yet in August 1998, after recording its first year of positive economic growth since the fall of the Soviet Union, Russia was forced to default on its sovereign debt, devalue the ruble, and declare a suspension of payments by commercial banks to foreign creditors. • Inflation had fallen from 131 percent in 1995 to 22 percent in 1996 and 11 percent in 1997 Despite this, restrictions were eased and lifted and Russian banks began borrowing more from foreign markets, increasing their foreign liabilities from 7 percent of their assets in 1994 to 17 percent in 1997. In a move that would challenge investor confidence even further, Yeltsin appointed 35-year-old Sergei Kiriyenko, a former banking and oil company executive who had been in government less than a year, to take his place. However, by May 27, demand for bonds had plummeted so much that yields were more than 50 percent and the government failed to sell enough bonds at its weekly auction to refinance the debt coming due.
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