Russians are increasingly turning to cash, a trend that is placing additional strain on the nation's wartime economy. This shift is driven by a combination of factors, including government efforts to crack down on the shadow economy, increased taxes, and disruptions to digital services.
The Kremlin has identified the reduction of the shadow economy as a key objective. Russian President Vladimir Putin has warned against pushing businesses into the informal sector through new regulations and has called for a significant decrease in illegal employment. However, some government actions, such as mobile internet shutdowns, inadvertently hinder tax collection efforts.
"One arm of the government is trying to squeeze as much money as possible out of people through higher taxes, fines and other charges," Alexander Kolyandr, a non-resident senior fellow at the Center for European Policy Analysis, 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 mobile internet shutdowns.
Despite attractive interest rates on bank deposits, with some offering 10% returns, a Soviet-era inclination to keep money at home is resurfacing. Central bank data revealed that Russians withdrew 550 billion rubles from bank accounts in May alone, including 200 billion rubles from fixed-term deposits. This outflow occurred even as the central bank maintains high interest rates to combat persistent, war-fueled inflation.
Businesses are also seeking ways to avoid higher tax burdens. A Moscow copywriter, who identified himself as Anton, reported receiving a discount from a vinyl shop vendor for paying in cash, with the vendor openly citing increased taxes as the reason. The intensification of mobile internet shutdowns, particularly during heightened security measures for Russia's Victory Day celebrations in May, caused significant difficulties for citizens attempting to access funds. Anton observed individuals struggling to find working ATMs in central Moscow, with one woman going from machine to machine in search of available banknotes.
These developments highlight a growing unease with digital financial systems and a resurgence of traditional, tangible currency as a means of managing personal finances and business transactions in Russia. The dual pressures of increased taxation and the unreliability of digital infrastructure are pushing more people and businesses toward cash, potentially complicating the government's economic management goals.