The wartime economy is making Russians hoard cold hard cash more than ever — the money in circulation reached a record $187 billion in June

• In June, the amount of cash in circulation in Russia hit a record $187 billion, per its central bank.
• Russians are hoarding cold, hard cash amid economic uncertainty, an economist told Novaya Gazeta.
• Compensation to families of dead fighters and increased demand in Russian-occupied Ukrainian regions also add to the cash in circulation.

Russians are keeping a record amount of cold, hard cash at hand amid the country’s wartime economy.

In June, the amount of cash in circulation in Russia hit a record 17.9 trillion rubles, or $187 billion, data from the Russian central bank shows.

The amount of cash circulating in the Russian economy saw a massive spike from 13.8 trillion rubles in January 2022 to 15.8 trillion rubles in February 2022, coinciding with its invasion of Ukraine, according to official data.

The cash in circulation then fell steadily till June last year before jumping 6% on-month to 15.2 trillion rubles in September — which coincided with Putin’s mobilization of reservists to fight the war. The amount of cash in circulation has been trending upward since then.  

On Monday, an economist told the independent Russian media outlet Novaya Gazeta that Russians are hoarding cash amid economic uncertainty — particularly after authorities restricted foreign currency withdrawals and transfers right after the war in Ukraine started.

“People don’t like depending on banks. Having cash means you have money,” Igor Lipsits, an economist and professor at Russia’s HSE University, told Novaya Gazeta. Russians who hold bank accounts in neighboring countries like Kazakhstan are also depositing their money in sanctions-free banks instead, he added to the media outlet.

Other than economic uncertainties, there’s also been an increase in demand for cash in newly Russia-occupied territories in Ukraine, a top-ranking Russian central bank official said in May, Russia’s RBC news outlet reported.

“The increased demand for cash is linked to the fact that the new regions, where bank payments are less common, need it,” said Alexey Zabotkin, the deputy governor of Russia’s central bank, per RBC.

On top of the higher demand, compensation paid to the families of dead mercenary Wagner Group fighters could also be contributing to the record amount of cash in Russia’s economy.

Several women confirmed to Bloomberg in June that they had collected the compensation — amounting to about 5 million rubles per person — in bags from pickup points around Russia. Many of them were told not to deposit cash at banks to avoid taxes and other complications.

About 22,000 Wagner fighters had died in the Ukraine war as of May 20 this year, according to a Wagner-affiliated Telegram channel.

Compensation for so many deaths would amount to more than 100 billion rubles worth of payments, much of which could be cash flowing in Russia’s economy.

To be sure, the increased cash circulating in Russia is contributing to higher inflation, Nikolay Korzhenevsky, another economist told Novaya Gazeta.

Russia’s inflation rate hit 3.25% in June from a year ago — increasing from 2.5% over the same period in May. To tame inflation, the Russian central bank its central bank raised interest rates by one percentage point on July 21 — double the 0.5 percentage point analysts polled by Reuters had expected.