Russians have increased cash withdrawals as mobile internet shutdowns disrupt card payments and businesses seek to avoid tax, adding pressure to a slowing wartime economy. The Central Bank reported that cash in circulation rose by 1.56 trillion roubles since the start of the year, the largest increase for any year outside the Covid‑19 pandemic. The rise follows a partial mobilisation in September 2022 and a Wagner mercenary group mutiny in June 2023. Mobile internet has been shut down repeatedly in regions affected by Ukrainian drone attacks, limiting electronic payment options. The increase in cash usage complicates tax collection, according to the Central Bank, as the budget deficit widens and war funding demands grow. In May, the economy ministry lowered its 2026 GDP growth forecast to 0.4%, the weakest projection since 2022. To raise revenue, the Kremlin raised VAT from 20% to 22% in January and reduced the threshold for small and medium enterprises to pay the tax, prompting many firms to handle more transactions in cash. Pharmacies, restaurants, beauty salons and market stalls have reported higher cash transactions to keep revenue below the VAT threshold and to avoid payroll taxes. Taras Skvortsov, chief financial officer of Sberbank, said that more wages are being paid in cash envelopes and that cash is staying in people's hands rather than returning to the banking system. A May survey by Opora Russia found that about 6% of entrepreneurs were using grey schemes such as omitting cash‑register receipts to cope with the higher tax burden. Cash wages allow businesses to avoid payroll taxes, while cash sales help them stay below the VAT registration level, according to the survey. The Kremlin has made cracking down on the shadow economy a priority, and President Putin warned before the VAT increase that the new rules must not push firms into illegal activity. Alexander Kolyandr, a senior fellow at the Center for European Policy Analysis, noted that one government arm is raising taxes and fines while another is restricting tax collection through mobile shutdowns, undermining the tax‑revenue strategy. Despite interest rates on one‑year deposits reaching 10%, Russians withdrew 550 billion roubles from bank accounts in May, including 200 billion roubles from fixed‑term deposits. A copywriter in Moscow reported that a vinyl shop offered a cash discount to offset higher taxes, and that people were moving between ATMs during the May Victory Day security period to obtain cash. Analysts say the growing reliance on cash could further limit the government's ability to fund the war and collect revenue, and the future impact remains unclear.