Cash use rises in Russia as war strains economy, tax collection
This digest was compiled by AI from multiple sources — links to the originals are below.
Russians are turning to cash as mobile internet shutdowns disrupt card payments and businesses seek to dodge taxes, adding 1.56 trillion roubles ($20bn) in cash circulation since January. The shift complicates tax collection as Russia faces a widening budget deficit and slowing growth, with GDP growth forecast cut to 0.4% for 2026.
Cash Surge Drivers
Russia added 1.56 trillion roubles in cash circulation since January, the largest increase for the period outside the Covid-19 pandemic, according to Central Bank data analyzed by the BBC. Ukrainian drone attacks have prompted the Kremlin to shut down mobile internet across large areas, leaving many unable to pay by card. The government says the shutdowns aim to counter drone strikes.
Tax Evasion Pressure
Higher taxes and a slowing economy are pushing businesses toward cash to keep income off the books. The Kremlin raised VAT from 20% to 22% in January and lowered the threshold for small and medium-sized businesses to pay it. Sberbank CFO Taras Skvortsov warned of "very serious signs" that more firms are paying wages "in envelopes," with cash not returning to the banking system.
Economic Slowdown
Russia's economy ministry cut its GDP growth forecast to 0.4% for 2026, the weakest since 2022. Although oil and gas revenues have benefited from higher prices following the Iran war, the broader economy is slowing. The cash shift adds strain as the state needs every rouble to fund the war in Ukraine.
130 Trillion Ruble Deposit Proposal
A proposal to use 130 trillion rubles from bank deposits for state needs has sparked public concern in Russia. The plan, linked to funding the war in Ukraine, has led to fears over private savings and protests outside banks.
What's Next
The Russian central bank is expected to release updated monetary policy guidance in the coming weeks. It remains unclear whether the cash trend will accelerate or whether authorities can reverse it through tighter regulation or digital payment incentives.
2 sources
Cash use rises in Russia as war strains economy, tax collection
