In brief
Since the beginning of the year Russia has poured 1.56 trillion roubles into circulation, the biggest jump in a pre‑COVID era. The rise follows repeated shutdowns of mobile internet used to counter Ukrainian drone strikes, which have made card payments difficult. Businesses now favour cash to stay below revised VAT thresholds, driving a shadow‑economy swell that frustrates state tax‑collection. Meanwhile the central bank reports 550 bn roubles withdrawn from bank accounts, including 200 bn roubles from fixed‑term deposits, signalling eroded confidence in the banking system. As the war drains the state’s coffers, the cash surge deepens a difficult cycle of unreported income and tax evasion.
At the start of 2026 Russia added a whopping 1.56 trillion roubles – about £15 billion – to cash in circulation, the largest pre‑COVID surge. The Central Bank points to a wave of mobile‑internet shutdowns across the country, launched by the Kremlin amid drone strikes on Ukrainian‑captured territory, as the main trigger for wholesale withdrawals.
A resident of Moscow recalls that the loss of mobile payment options gave her a sense of security: “Having cash on hand means I can buy essentials when the network goes down,” she told reporters.
The shift to cash isn’t just a personal safeguard – businesses across sectors are steering customers toward cash to keep their turnover below the new VAT threshold. In May, the Russian tax ministry cited a 6 % rise in entrepreneurs using grey‑scheme practices to dodge both VAT and payroll taxes.
Sberbank’s chief financial officer warned of a widening “gap” where money remains in private hands rather than flowing back into the banking system. According to the bank, 550 bn roubles were withdrawn from accounts in May alone, including 200 bn from fixed‑term deposits that originally offered a 10 % interest rate.
The government’s effort to boost revenues – raising VAT from 20 % to 22 % and lowering exemption thresholds – has pushed cash‑centric stores, from pharmacies to corner shops, to seek business outside official channels. Owners report “less money goes through the till” when customers insist on cash payments.
While the oil and gas sector absorb the pressure of rising commodity prices, the rest of the economy is slowing. The Ministry of Economy reduced its 2026 growth forecast to 0.4 %. With a widening budget deficit, the Kremlin turns to every rouble it can collect – but cash keeps flowing away from taxation.
White‑label annual data reveal a vicious cycle: private cash hoarding, tax evasion, and a shrinking central revenue base that hinders funding for the Ukraine war.
Source: BBC Monitoring, 9 July 2026.
