MOSCOW, April 16. /TASS/. Economic Development Minister Maxim Reshetnikov ruled out the probability of a default in Russia similar to the one the authorities announced in 1998.
He made it clear in an interview with the Pozner talk show on Russia’s Channel One.
"No," Reshetnikov said, answering the question of the presenter, if there at least a minimal probability of default now as it was as in 1998.
He stressed that in the current situation, the government should help entrepreneurs, "so that they still have a desire to do business and develop their business in Russia."
"It seems to me that in the long run and we will understand what this crisis has shown us: we have built a very developed, very diversified economy. Indeed, unlike 2008, when we primarily saved large enterprises, we are now talking about small and medium business, " the minister said.
Earlier on Thursday, speaking at a cabinet meeting, Prime Minister Mikhail Mishustin said that more than 500,000 small and medium-sized enterprises employing more than 3 million people will receive direct financial support from the state.
Default of 1998
In August 1998, the Russian authorities had run out of resources to finance public debt and maintain the ruble. By that time, the national debt totaled almost $200 billion (44% of GDP)
On August 17, right after the publication of the government's decree, exchange offices stopped selling currency. The ruble rate depreciated three times on the stock exchange. On September 8, the Bank of Russia lowered the rate to 20 rubles to the dollar. After that, the national currency strengthened to 8 rubles (on September 15, 1998), but then plummeted again to 20 rubles to the dollar in December 1998 and 25 rubles in April 1999.
The default led to the collapse of large banks that had invested in GKO bonds such as Inkombank, Mosbusinessbank, SBS-Agro, Most-Bank, etc. According to estimates of the Institute for the Economy in Transition, these banks held from 37% to 68% of all deposits of the county's population.
According to the calculations of the Moscow Banking Union, the losses the Russian economy suffered due to the crisis of August 1998 amounted to $96 bln.
Despite the devastating consequences of the default, the devaluation of the ruble helped the Russian economy become more competitive. A sharp decline in imports pushed the development of domestic production expanding opportunities for exports. The government took measures to improve collection of taxes; in particular, in 2001 it set a flat schedule of personal income tax for individuals at 13%.