Russians turn to cash, putting more strain on slowing wartime economy

Key developments are emerging from the global stage. Russians turn to cash, putting more strain on slowing wartime economyImage source, Anadolu via Getty ImagesImage caption, There have been several surges in cash withdrawals as Russians seek a buffer against uncertaintyByEvgeny Pudovkin and Daria Mosolova, MonitoringPublished24 minutes agoRussians are returning to cash, as mobile internet shutdowns disrupt card payments, and more businesses seek to dodge tax under mounting financial pressure more than four years into the war with Ukraine. 8bn; $20bn) in cash into circulation since the start of the year - the biggest rise for the equivalent period in any year outside the Covid-19 pandemic, according to Central Bank figures analysed by the . The spike comes amid a wave of Ukrainian drone attacks, which have repeatedly led the Kremlin to shut down mobile internet across large swathes of the country, leaving many unable to pay by card.

The government says the aim of the shutdowns is to counter the drone strikes. "Having cash on hand gives you some sense of control and security," one woman in Moscow told the 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 Details

"The latest increase follows several earlier wartime surges in cash withdrawals as Russians have sought a buffer against uncertainty. Cash in circulation jumped 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 is making it harder for the state to collect tax, just as it faces a widening budget deficit and needs every rouble it can raise to fund the war in Ukraine.

Although Russia's oil and gas sector, which accounts for about a quarter of state revenues, has benefited from a recent rise in oil prices following the Iran war, the broader economy is slowing. In May, the Russian economy ministry cut its GDP growth forecast to 0. 4% for 2026, putting the country on course for its weakest economic growth since 2022.

To boost revenues, the Kremlin hiked VAT from 20% to 22% in January, and lowered the threshold at which small and medium-sized businesses have to pay it, pushing many already struggling firms to the brink. With margins squeezed by higher taxes and a slowing economy, pharmacies, restaurants, beauty salons and corner shops are increasingly steering customers towards cash to keep more income off the books. Russian fuel shortages bite – but will Putin change tack in Ukraine war?

Published8 July"Stalls at our market have been closing one after another because it's no longer profitable to stay open," said one woman, who runs a small clothing shop at a market 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.

The development has drawn wide international attention, with diplomatic circles watching closely.