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The use of cash is surging in Russia, which has been at war with Ukraine for over four years, according to a report by the BBC.
Data from the Central Bank of Russia shows that the amount of cash in circulation has increased by 1.56 trillion rubles (approximately 29.7 trillion won) so far this year.
This marks the largest increase since the COVID-19 pandemic.
Analysts suggest that the rise in cash usage is a result of widespread mobile internet shutdowns implemented by Russian authorities to counter drone attacks from Ukraine.
As mobile internet outages have made card payments at shops and restaurants frequently unreliable, a culture of using cash has spread among citizens.
Tax increases by the Russian government are also cited as a reason driving cash transactions.
To cover war expenses, Russia raised its value-added tax from 20% to 22% starting in January of this year and tightened taxation standards for small and medium-sized enterprises.
With the tax burden growing, an increasing number of retail businesses, including restaurants, are encouraging customers to pay in cash to underreport their sales.
It is also reported that the practice of paying employees in cash to reduce taxes, known as "envelope wages," is on the rise.
A survey by Opora Russia, an association for small and medium-sized enterprises, found that approximately 6% of such businesses admitted to utilizing the "gray economy," including expanding cash transactions, to reduce their tax burden.
While the Central Bank of Russia maintains high interest rates to curb wartime inflation—with bank deposit rates reaching around 10% per year—funds are flowing out of banks.
According to the Central Bank of Russia, the amount of cash withdrawn from banks in May alone reached 550 billion rubles (approximately 10.5 trillion won).
Notably, 200 billion rubles (approximately 3.8 trillion won) of that amount was withdrawn from time deposits.
Experts analyze this phenomenon as a result of economic and social instability caused by the war.
They suggest that a social atmosphere is spreading where people prefer to keep cash at home, reminiscent of the Soviet era, rather than in bank accounts.
In Russia, cash withdrawals also surged during the armed rebellion by the Wagner mercenary group in 2023.
Despite increased oil and gas revenue due to rising international oil prices, the Russian government recently lowered its economic growth forecast for next year to 0.4% as fiscal burdens and economic slowdowns persist due to the prolonged war.
(Photo: Getty Images Korea)
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