oblems led investors to underestimate the risk of investing in emerging markets such as Russia, and that unregulated short-term investment flow led to downfall of Russian economy.

“Who was to be held responsible for the 1998 Financial Crisis?”

The 1998 Russian Financial crisis arises due to lack of Governance and the policies that were implemented with collaboration of both Central Bank of Russia and Russian Government. Some policies were implemented with consent of both parties that led to downfall of Russian economy and Ruble was devalued.

A. The Role of Government:

In March 1998 there was increase in the series of Russian political crisis. Russian Prime Minister Viktor Chernomyrdin and his entire cabinet were dismissed by President Boris Yeltsin on 23 March 1998. Yeltsin replaced him by the 35 years old Energy Minister Sergei Kiriyenko who was being criticized a lot by the people of Russia. Boris Fyodorov was appointed as the head of tax department in the tenure of Yeltsin. Russian economy was not in so good economic condition in order to improve the economy the acting Prime Minister Sergei imposed a policy that raised GKO by 150%. GKO stand for “Gosudarstvennoye Kratkosrochnoye Obyazatyelstvo” in Russia for Short term Government Commitments also known as Treasury Bills. Other than that on 13 July 1998, $22.6 Billion loan was approved b IMF and World Bank was approved to stabilize the Russian market as well as to support reforms. To stabilize the Russian market the large quantity of the quickly swapping GKO’s were been converted into Eurobonds.

However Government keep the exchange rate of Ruble fixed .As a viewpoint of some economists they suggested that Government should have abandon its support for the Ruble .