In brief
Amid the Ukraine war, Russians are rolling out cash, re‑circulating 1.56 trillion roubles this year – the biggest jump since Covid‑19. Frequent internet shutdowns hinder card payments, while a 20 % to 22 % VAT hike forces businesses to favour cash. Shops, restaurants and other small firms are using cash to stay under the tax radar, stunting the state’s tax‑catching machine. Even high‑interest deposits are losing out as 550 bn roubles leave banks, leaving the economy under more strain than ever.
Cash is Making a Comeback in Russia
The Central Bank says the amount of cash on the streets of Russia jumped by 1.56 trillion roubles (about 15 billion pounds) this year – the biggest rise in the last decade. The surge is happening as the war in Ukraine keeps going on, the government cuts off mobile internet to stop drone attacks and throws new taxes on businesses.
Without internet, cards don’t work, so folks go to banks or ATMs to grab big stacks of bills. Many small shops and cafés are now asking shoppers to pay in cash so they can dodge the 22 % VAT that the Kremlin raised in January. It also lets them avoid having to pay payroll taxes for staff.
The country’s budget is already stretched thin by defence spending – and the steps taken to tax more wealth are now harder to enforce because the money stays out of the banking system. About 550 bn roubles were withdrawn from banks last May alone, with 200 bn coming from fixed‑term deposits that should have earned 10 % interest.
Even though banks can offer good interest, people still favour cash – a habit that roots back to Soviet times – when there is perceived security and control over a physical stash.
The shift back to cash is a major hurdle for the Kremlin, which hopes to squeeze as much money out of the population as it can, but is now losing revenue that used to come from card payments and printed receipts.
