Russians have increasingly turned to cash transactions, intensifying pressure on the country's slowing wartime economy. This trend follows earlier surges in cash withdrawals after President Vladimir Putin announced a partial mobilisation in September 2022 and during a brief Wagner mercenary mutiny in June 2023.

The shift toward cash is complicating tax collection efforts just as the Russian government faces a widening budget deficit and increased war funding needs. Despite a recent rise in oil prices benefiting Russia's oil and gas sector, which contributes about a quarter of state revenues, the broader economy is decelerating. In May 2026, the Russian economy ministry cut its GDP growth forecast to 0.4%, marking the weakest growth since 2022.

To increase revenues, the Kremlin raised the VAT rate from 20% to 22% in January and lowered the threshold for small and medium-sized enterprises (SMEs) to pay VAT. These measures have pushed many struggling businesses to the brink. A small clothing shop owner in Pskov reported, "Stalls at our market have been closing one after another because it's no longer profitable to stay open."

Most businesses still operating encourage customers to pay in cash to reduce the amount of money passing through official registers. According to Skvortsov, cited by state news agency Interfax, "We are not seeing cash return to the banking system through cash collection, ATMs or self-service terminals," highlighting concerns over cash flow back into formal channels.

A May survey by Opora Russia, the country's largest SME association, found that about 6% of entrepreneurs have resorted to "grey schemes" such as avoiding cash-register receipts to cope with the increased tax burden.

Additionally, intensified mobile internet shutdowns during heightened security around Russia's Victory Day celebrations in May led to difficulties for people withdrawing money, as observed at a flower market in central Moscow.

These developments underscore the economic pressures facing ordinary Russians and businesses amid ongoing conflict and fiscal tightening.

Sources