Russia cash use is rising as mobile internet shutdowns disrupt card payments and more businesses try to stay below the tax radar.
Russia cash use is climbing as mobile internet shutdowns disrupt card payments and more businesses look for ways to dodge tax under the strain of more than four years of war with Ukraine. Central Bank figures reviewed by the BBC show Russia has added 1.56tn roubles in cash to circulation since the start of the year, the biggest rise for the same period in any year outside the Covid-19 pandemic.
The increase comes after a wave of Ukrainian drone attacks prompted the Kremlin to cut mobile internet across large parts of the country. Officials say the shutdowns are meant to help counter the strikes, but the outages have left many Russians unable to pay by card. One woman in Moscow told the BBC, on condition of anonymity, that carrying cash gives her a sense of control and security if the network goes down during an emergency.
This is not the first wartime jump in cash demand. Russians also rushed to withdraw money after President Vladimir Putin announced partial mobilisation in September 2022 and during the Wagner mercenary mutiny in June 2023. Now the shift is creating another problem for the state: it is making tax collection harder at a time when Russia faces a widening budget deficit and needs more money to support the war effort.
The broader Russian economy is slowing even as oil and gas revenues have gotten a lift from higher oil prices after the Iran war, according to the BBC's report. In May, the economy ministry cut its GDP growth forecast for 2026 to 0.4%, which would make it Russia's weakest growth since 2022. To raise more revenue, the Kremlin increased value-added tax from 20% to 22% in January and lowered the threshold for small and medium-sized firms to pay it, pushing many stressed businesses closer to the edge.
That pressure is showing up on the ground. Pharmacies, restaurants, beauty salons and small shops are steering customers toward cash so more sales can stay off the books, while a market clothing seller in Pskov told the BBC that stalls are closing because trade is no longer profitable. Sberbank's chief financial officer, Taras Skvortsov, warned last month that more wages were being paid in envelopes, and a May survey by Opora Russia said about 6% of entrepreneurs had turned to grey schemes, including skipping cash-register receipts. Anton, a Moscow copywriter, said a vinyl shop offered him a cash discount because of higher taxes.
Even with bank deposit rates still high as the central bank fights inflation, the old habit of keeping money under the mattress is returning. Russians withdrew 550bn roubles from bank accounts in May, including 200bn roubles from fixed-term deposits, according to central bank data. The takeaway: wartime pressure, internet shutdowns and higher taxes are pushing more everyday transactions out of the banking system and into cash.
