In brief
Since the start of the year, Russian cash in circulation has grown by 1.56 trillion roubles, the biggest rise outside COVID‑19. Drivers include mobile‑internet shutdowns that block card payments, a 22 % VAT hike, and shrinking business profits. The shift to cash increases tax evasion and pushing small firms into informal payments, as the state battles a widening deficit needed for the Ukraine war. Historical distrust in digital banking and high bank‑deposit yields fuel this trend.
Russians are turning back to cash, driven by mobile‑internet outages that block card payments, higher taxes and a slowing economy, for more than four years now. The Central Bank reports that cash in circulation has rose by 1.56 trillion roubles (about $20 billion) since the start of this year – the biggest increase in any year outside the COVID‑19 pandemic.
The spike comes amid waves of Ukrainian drone attacks, which prompt the Kremlin to shut down mobile internet over large swaths of the country, leaving many unable to pay by card. The government says the aim is to stop the drones, but the shutdown also limits digital payments.
“Having cash on hand gives you some sense of control and security,” a woman in Moscow told the BBC. “If there's an emergency in the city, I know I'll still be able to buy basic necessities, even if the mobile network goes down.”
This trend is tightening the state’s tax net. Earlier in the conflict, cash withdrawals surged after President Vladimir Putin announced a partial mobilisation in September 2022 and during a brief mutiny by the Wagner mercenary group in June 2023. Now, the shift makes it harder for the government to collect tax revenue as it faces a widening budget deficit and needs every rouble it can raise for the Ukraine war.
Although Russia’s oil and gas sector – a quarter of state revenue – benefited from a recent rise in oil prices, the broader economy is slowing. In May the Russian economy ministry cut its GDP growth forecast to 0.4 % for 2026, the country’s weakest growth since 2022.
To boost revenues, the Kremlin raised VAT from 20 % to 22 % in January, lowered the threshold at which small and medium‑sized businesses must pay it, pushing many struggling firms to the brink. Pharmacies, restaurants, beauty salons and corner shops are increasingly steering customers toward cash to keep more income off the books.
The shift to cash is also increasing informal employment. "The shadow economy is becoming a key target for the Kremlin," says Sberbank CFO Taras Skvortsov. "Cash payments help businesses understate turnover to stay below the VAT threshold, while cash wages help them avoid payroll taxes."
Analysts say the Soviet‑era instinct to keep money “under the mattress” is making a comeback, despite the fact that banks are offering double‑digit returns: a 100,000‑rouble one‑year fixed‑term deposit at Sberbank currently pays 10 % interest. Still, central bank data show Russians withdrew 550 bn roubles from bank accounts in May, including 200 bn roubles from fixed‑term deposits.
When mobile‑internet shutdowns intensified during heightened security around Russia’s Victory Day celebrations in May, a copywriter living in Moscow reported seeing people struggle to withdraw money to spend at a flower market. He pointed out that the vendor offered a cash discount because of higher taxes.
The Kremlin’s attempts to yank revenue from the economy through higher taxes, fines and other charges clash with its need to keep the population calm during the war. In this environment, cash remains the safest and most flexible medium for people and micro‑businesses alike.
