9:40 27/11/2015Rain+6°C


© RIA Novosti. Iliya Pitalev

Cash economy faces crackdown

by at 20/01/2012 19:27


Cash may be king in Russia, but the Finance Ministry is looking to dethrone it. The ministry has called for large cash payments to be banned and for cash salaries to be stamped out in an attempt to reduce the volume of cash as a proportion of the total money supply.

The total share of cash is 25 percent of the total money supply,” Gazeta.ru quoted Finance Minister Anatoly Siluanov as saying on Friday at the Gaidarovsky Forum. “The figure in developing countries is about 15 percent, while in developed countries it is 7 to 10 percent. Uncontrolled cash flows leads to an increase in the shadow economy and the informal sector of the economy in Russia amounts to about 30 percent of GDP,” Siluanov said. If all large purchases and all wages were translated into non-cash, tax revenues would increase, the minister added.
Gazeta.ru reported that work was already underway to implement the changes, citing a report from the Finance Ministry. “Among other issues, the council is considering draft legislation on stimulating growth in the share of non-cash payments, and reducing the shadow economy of money in the Russian economy,” a Finance Ministry report said.


Gref agrees

The idea of ​​reducing cash turnover is also being actively pursued by Sberbank head German Gref. Last summer, he appealed to Prime Minister Vladimir Putin in a letter, which detailed how the large volume of cash transactions made it difficult for banks and prevented the transformation of Russia into an international financial center, Gazeta.ru reported. Russia’s total amount of cash in the money supply in is 11.9 percent of GDP, whereas in the United States it is 6.6 percent, while in Mexico and Brazil it is even less at 5.3 and 4.2 percent respectively, Gref wrote. As Siluanov proposed, Gref said all wages, pensions and benefits should be paid in a cashless form, and all major commercial and service enterprises should be made to accept bank cards.


Lack of transparency

Financial company Sistema’s head economist Yevgeny Nadorshin said that the high level of cash in the money supply was simply a symptom of the general lack of transparency in the economy.

As the Russian economy is far from being completely transparent, a certain amount of cash is needed by shadow agents to service their turnover,” Kommersant quoted Nadorshin as saying on Friday. “In this context the fight against cash should be focused on the work needed to ensure that every economic agent in the Russian economy finds it beneficial to conduct their activities transparently.”

Finam Management’s head economist, Alexander Osin, also pointed to the general economic situation as a cause for high cash levels.

We have higher economic and geopolitical risks” Kommersant quoted Osin as saying on Friday. “This is reflected in the desire of the people to keep their money in cash. There are prerequisites. If the state wants to make the system more transparent, it must solve these problems in conjunction.”


Practical issues

More practical problems also prevented the use of non-cash payments, experts said. Home Credit bank analyst Stanislav Duzhinsky said that poor banking infrastructure hindered non-cash transactions and that only the Central and Northwestern Federal Districts were sufficiently developed at present, Gazeta.ru reported.

According to a joint study by Home Credit and the National Association of Financial Studies, in October 2011 only 40 percent of respondents had ever used bank cards and 89 percent of these cards had been issued either by an employer or educational institution.
Duzhinsky said that the use of bank cards and other non-cash systems was not something that could be forced upon the population.

“In the West, the culture of retail banking services evolved over the centuries,” Gazeta.ru quoted Duzhinsky as saying. “Russia’s modern banking system is slightly older than 20 years and to achieve the same degree of penetration of banking services, including non-cash payments, takes time.” 


  • Send to friend
  • Share
  • Add to blog

Advertising in The Moscow News

Most read