Russians, accustomed to living in continuous unpredictability, have been accumulating rubles for months in the drawers of their homes. The withdrawal of cash has been so massive since the beginning of the year that the Central Bank of Russia has carried out a major upward revision of the liquidity needs of the financial system until the end of 2026. Blockages of the internet – and by extension of payment systems – by the authorities for supposed “security reasons” have pushed Russians to withdraw money from ATMs. And to this is added, in the midst of the search for income to pay for the war against Ukraine, a new bill that will tighten controls on cash payments to businesses. In the period between May 1 and 11, marked by the long weekends of Labor Day and Victory Day, the Russians took out 210.5 billion rubles, about 2.5 billion euros, a historical record and five times more than the 41.2 billion last year. As a comparison, in 2020, the year of the pandemic, Russians withdrew 133.5 billion rubles of cash. That’s three consecutive months that Russians kept their money in cash. In April they withdrew 607.3 billion rubles, about 7 billion euros, while in March they withdrew another 300 billion rubles. There has only been one month in the entire war waged against Ukraine in which the Russians took more money: September 2022, the month in which Vladimir Putin decreed a partial mobilization of his population and hundreds of thousands of citizens fled out of the country. The main cause has been Internet blockages. The Russian security services had already cut off the operation of the internet and SMS messages on mobile phones in several regions since autumn last year, especially in the provinces bordering Ukraine, although the major financial hubs, Moscow and St. Petersburg, had been temporarily spared. However, the authorities tried the Internet blackout in large cities this spring with the excuse of guaranteeing the “safety” of their citizens. The Internet cuts not only disconnected WhatsApp and Telegram chats. Bank applications and many dataphones stopped working. Ordering a taxi or food at home could be an odyssey. The Internet outages were temporary in February and March, lasting several days in which the phones were an unused brick on the street. Later, before the May holidays, Russian banks warned their customers that network disruptions could affect their online payments and ATMs. Among them is Sberbank, an entity with more than 100 million clients. These problems have been joined by other reasons why Russians want to have cash. This year’s massive tax hike has pushed some businesses to make offers for cash payments. The State Duma, the lower house of the Russian parliament, is considering a bill to strengthen controls on payments, especially targeting illegal commercial activities. According to the rule, the Federal Tax Service will have access to money transfers between people and a justification of all income will be required from those who receive more than 2.4 million rubles on their card throughout the year, about 2,300 euros per month in 12 payments. A study by two economists from the Rossiya Bank points out that Russians’ savings for unforeseen events have grown significantly in the last three years and are around 38% of their assets, a very high percentage. higher than other countries like China [del 15% al 25%]Germany [20%]France [9%] or Italy [6%]. This, according to experts, would hamper the growth of the Russian economy. The Central Bank of Russia has raised its forecast for banks’ liquidity needs «mainly due to the expected higher growth in cash demand.» However, it highlights in its report Monetary conditions and transmission of monetary policy that the situation is expected to be stable in the long term. The monetary body headed by Elvira Nabiúllina has revised the growth of cash in circulation for this year from an estimate of 800,000 million to 1.3 trillion rubles, between 900,000 and 15,000 million euros, to a range between 1.5 and 2.1 trillion rubles, between 17,500 and 25,000 million euros. This, and the conversion of foreign currencies to rubles by the Central Bank and the Ministry of Finance to replenish the Russian National Investment Fund with surplus income from last year, as required by the national fiscal rule, has caused the structural bank liquidity deficit to increase from a range of between 1.9 and 3 trillion rubles to another between 2.4 and 3.6 trillion rubles. That is, from 35,00 to 42,000 million euros maximum, according to the monetary organization. You can consult other letters in this section here.
