Russians, accustomed to living with constant unpredictability, have been stashing rubles for months in the drawers of their homes. Cash withdrawals have been so massive since the start of the year that the Bank of Russia has carried out a substantial upward revision of the financial system’s liquidity needs through the end of 2026. Internet shutdowns — and, by extension, disruptions to payment systems — ordered by the authorities for alleged “security reasons” have driven Russians to withdraw money from ATMs. Added to this, in a bid to raise revenue to fund the war against Ukraine, is a new bill that would tighten controls on cash payments to businesses.
Between May 1 and 11 — a period marked by the Labor Day and Victory Day long weekends — Russians withdrew 210.5 billion rubles, or about $2.9 billion, a record high and five times more than the 41.2 billion rubles withdrawn last year. By comparison, in 2020, the year of the pandemic, Russians withdrew 133.5 billion rubles in cash.
This is the third consecutive month in which Russians have been hoarding cash. In April citizens withdrew 607.3 billion rubles, roughly $8.15 billion, while in March they took out another 300 billion rubles. There has been only one month during the war with Ukraine in which Russians withdrew more money: September 2022, the month Vladimir Putin ordered a partial mobilization and hundreds of thousands of citizens fled the country.
The main cause has been internet blackouts. Russian security services had already cut off internet access and SMS messaging on mobile phones in several regions since last autumn, especially in the provinces bordering Ukraine, although the major financial centers — Moscow and St. Petersburg — had been temporarily spared. However, the authorities tested an internet blackout in the large cities this spring under the pretext of guaranteeing the “safety” of citizens.
Internet outages didn’t just disconnect WhatsApp and Telegram chats. Bank apps and many card readers stopped working. Ordering a taxi or takeaway could become an odyssey.
The internet outages were temporary in February and March, lasting several days during which phones were useless bricks on the street. Later, before the May holidays, Russian banks warned customers that network disruptions could affect their online payments and ATMs. Those warnings came from institutions including Sberbank, which has more than 100 million customers.
Other factors have added to Russians’ desire to hold cash. This year’s massive tax increases have prompted some businesses to offer discounts for cash payments. The State Duma, the lower house of the Russian parliament, is processing a bill to strengthen controls on payments, aimed especially at illegal commercial activities. Under the rule, the Federal Tax Service would have access to money transfers between individuals, and anyone receiving more than 2.4 million rubles on their card over the course of a year — about $2,680 per month paid in 12 instalments — would be required to justify all such income.
A study by two economists at Rossiya Bank indicates that Russians’ precautionary savings have grown markedly over the past three years and account for around 38% of their wealth, a share much higher than in countries such as China (15%–25%), Germany (20%), France (9%), or Italy (6%). According to the experts, this would weigh on Russia’s economic growth.
The Bank of Russia has raised its forecast for banks’ liquidity needs “primarily because of the higher expected growth in demand for cash.” Nevertheless, it stresses in its report Monetary conditions and the transmission of monetary policy that the situation is expected to be stable in the long term.
The monetary authority led by Elvira Nabiullina has revised its estimate of the growth of cash in circulation for this year from 800 billion to 1.3 trillion rubles — between $10.5 billion and $17.46 billion — to a range of 1.5 to 2.1 trillion rubles, between $20.4 billion and €21.9 billion.
This, and the conversion of foreign currencies into rubles by the central bank and the Ministry of Finance to supply the National Wealth Fund of Russia with last year’s surplus revenues, as required by the national fiscal rule, has caused the structural banking liquidity shortfall to rise from a range of 1.9–3 trillion rubles to 2.4–3.6 trillion rubles. In other words, from $40.7 billion to $48.9 billion at most, according to the monetary authority.
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