The Russian financial crisis led to severe and disastrous effects towards the economy of Russia. Though Russia didn’t suffered a lot at time when it was made a Sovereign state but it suffered more in 1998. The foremost and direct impact was on its economy. The Russian economy contracts by 5.3% in 1998 not only this but the GDP level reaches its lowest level since its formation in 1991.

The economy and Russians suffered from the high inflation rate. Inflation rate was about 84% and the welfare of the people grew. The food prices were high which grew social unrest and people also started to migrate to other countries. This also led many banks such as Inkombank, Oneximbank and Tokobank to close down its functions.

The Agriculture sector also badly affected by the rise of crisis. There was 80% decrease in federal subsidies since 1997 though the impact on the regional subsidies was felt less. Farmers had to produce at a very large amount but their exchange was low. The Federal Government of Russia decrease the subsidies provided to farmers and other people as result the cost prices of the products grew more rapidly. On 9 October 1998 Russian also suffered from poor harvest and applied for the humanitarian aid.

The most important negative impact this event has was the political fallout. Yeltsin Government was to be held responsible for the occurrence of the panic attack. On 23 August 1998, Yeltsin fired Kiriyenko and wanted Chernomyrdin too return but the legislature didn’t accept it. Though as his replacement foreign minister Yevgeny Primakov was selected. However his appointment restored political stability but it was not up to the mark. On 7 October 1998, Communists and Russian Trade Union called a strike and demanded Yeltsin to resign.