Cash transactions are becoming increasingly common in Russia as repeated mobile internet shutdowns and mounting economic pressure push consumers and businesses away from electronic payments.
According to figures from Russia’s Central Bank analysed by the BBC, cash in circulation has increased by 1.56 trillion roubles (£14.8 billion/$20 billion) since the beginning of the year — the largest rise for the same period outside the COVID-19 pandemic.
The increase comes as Ukrainian drone attacks continue to prompt Russian authorities to suspend mobile internet services across large parts of the country, disrupting card payment systems. The Kremlin says the shutdowns are aimed at preventing further drone strikes.
One Moscow resident said the outages have made carrying cash feel like a necessity.
“Having cash on hand gives you some sense of control and security,” she told the BBC on condition of anonymity.
“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.”
The latest surge follows similar spikes in cash withdrawals during key moments of the war, including after President Vladimir Putin announced partial military mobilisation in September 2022 and during the Wagner Group mutiny in June 2023.
The growing reliance on cash is also complicating tax collection efforts at a time when Russia is grappling with a widening budget deficit and increased military spending.
Although higher global oil prices have provided some relief for Russia’s oil and gas sector, the wider economy has continued to slow. In May, the economy ministry reduced its 2026 growth forecast to just 0.4 per cent, signalling the weakest expansion since 2022.
To boost government revenue, authorities raised value-added tax (VAT) from 20 to 22 per cent in January and lowered the threshold requiring small businesses to pay the tax.
The changes have placed additional financial pressure on many businesses, leading some pharmacies, restaurants, salons and small retailers to encourage customers to pay in cash.
“Stalls at our market have been closing one after another because it’s no longer profitable to stay open,” said a clothing trader in the western city of Pskov.
“Most of those still trading ask customers to pay in cash whenever they can, so less money goes through the till.”
Sberbank Chief Financial Officer Taras Skvortsov warned that more employers are now paying workers unofficially in cash.
“This is a very worrying moment… We are not seeing cash return to the banking system through cash collection, ATMs or self-service terminals,” Skvortsov said, according to state news agency Interfax.
“It is staying in people’s hands.”
A May survey by Russia’s largest small business association, Opora Russia, found that around six per cent of entrepreneurs had adopted what it described as “grey schemes” to reduce their tax burden, including avoiding official receipts and paying salaries in cash.
President Vladimir Putin has previously acknowledged the risk of businesses moving into the informal economy. Before the VAT increase took effect, he urged officials to ensure the new tax measures would not force companies underground and called for a “radical reduction in illegal employment”.
Alexander Kolyandr, a non-resident senior fellow at the Center for European Policy Analysis, argued that government policies are sending mixed signals.
“One arm of the government is trying to squeeze as much money as possible out of people through higher taxes, fines and other charges,” he told the BBC.
“But another, in trying to counter so-called terrorist threats, is undermining that strategy by making it harder to collect tax,” he said, referring to the repeated mobile internet shutdowns.
Despite banks offering double-digit interest rates on deposits, many Russians continue to withdraw their savings. Central bank data showed that 550 billion roubles were taken out of bank accounts in May alone, including 200 billion roubles from fixed-term deposits.
Anton, a Moscow-based copywriter, said he recently received a discount after agreeing to pay cash at a vinyl record shop.
“He was upfront about the reason: higher taxes,” Anton said.
He also recalled seeing residents struggle to withdraw cash during internet disruptions around Russia’s Victory Day celebrations.
“There was a woman going from one ATM to another, looking for one that still had banknotes.”
