Russian financial crisis GKO

GKO ( Russian: Gosudarstvennoe Kratkosrochnoe Obyazatelstvo) acronym for notorious short term state bonds issued by the state of Russia since February 1993. The literal translation of the term is state short term obligation .

The acronym is synonymous with the Russian financial crisis in 98 when the state defaulted on its GKO obligations. The GKO crisis was a significant financial crisis in post independence Russia and caused a frenzy foreign and domestic investors and creditors. The crisis lead to devaluation of the Russian ruble. The crisis severely undermined confidence in the rouble's stability, although dramatic drops have not happened again.

Prior to the crisis, the GKO issuance policy resembled those of pyramid schemes or Ponzi schemes, with interest on matured obligations being paid using the proceeds of newly issued obligations.

The global recession of 98, started with the Asian financial crisis in July 97, it exacerbated Russia's financial crisis. Given the ensuing decline in world commodity prices, nations heavily dependent on the export of raw materials, such as oil, were among those most severely hit. (Petroleum, natural gas, metals, and timber account for more than 80% of Russian exports, leaving the nation vulnerable to swings in world prices. Oil is a major source of government tax revenue.

Inkombank was one of the most high profile casualties of the events of August 98. It was one of Russia's largest banks, it closed its doors almost overnight.

After 98 a new series of state bonds was issued. Today, they are called GKO-OFZ.

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