Citizens` foreign currency reserves increased by $1.4 billion.
Photo: ru.freepik
From January to June 2025, Russian citizens significantly increased their holdings of cash foreign currency, adding $1.4 billion to their reserves. This surge brought the total volume of dollars, euros, yuan, and other foreign denominations held by individuals at home to an impressive $93.5 billion. Data from the Central Bank of Russia confirms this substantial trend. Experts have weighed in, offering comprehensive explanations for why citizens are actively accumulating physical foreign currency.
Natalia Milchakova, a leading analyst at Freedom Finance Global, highlighted that while 2022 saw a record 14% surge in cash foreign currency savings due to sanctions and general uncertainty, this trend reversed thereafter, with volumes gradually decreasing until early 2025. However, the first six months of the current year marked a notable shift, showing a 2% increase in cash currency holdings compared to the second half of the previous year – a first in three years, despite a strengthening ruble during this period. Milchakova suggests this indicates Russian citizens anticipate a new ruble devaluation by year-end.
She also pointed out that interest rates on ruble deposits have been steadily declining since spring, a trend that accelerated significantly after the Central Bank`s key rate cut in June. While banks foresee a slowdown in inflation and further rate reductions, the public remains skeptical of optimistic inflation forecasts and harbors distrust regarding the ruble`s stability.
Meri Valishvili, Associate Professor at the Department of State and Municipal Finance at Plekhanov Russian University of Economics, added that although the overall increase may appear moderate, the renewed interest in cash currency signifies people`s search for protective instruments for their disposable income. Deposit rates are becoming less attractive, yet saving remains a top priority for many. Cash foreign currency serves as an accessible alternative to safeguard money against depreciation.
The changing dynamics of the exchange rate also play a role: with the ruble strengthening against the US dollar in early summer, it presented an opportune moment to purchase foreign currency at lower costs. Furthermore, expert statements about the potential for further ruble weakening contribute to public sentiment, encouraging citizens to try and capitalize on anticipated exchange rate fluctuations.
Economist and financial communications top manager Andrei Loboda emphasized that these are not the sole reasons. Beyond expectations of ruble weakening and the desire to hedge against currency risks, there are localized concerns about potential disruptions in banking infrastructure and services. For many, physical dollars and euros represent a crucial «last resort» reserve.
The pervasive general uncertainty also encourages keeping money «under the mattress,» reflecting a lack of trust in long-term financial instruments. Loboda noted that this trend is not a positive signal for the broader economy, as the increase in cash currency held by citizens reduces liquidity in the banking system and can consequently restrict lending.
The expert warns that while holding cash foreign currency offers a sense of security during uncertain times, it ultimately sacrifices profitability because physical money depreciates under inflationary pressure. Therefore, this strategy is justified as a protective measure, but in the long run, it is outperformed by yield-generating investment tools such as deposits, stocks, and bonds.
Milchakova forecasts that with the increase in utility tariffs from July 1, 2025, and the rise in inflation expectations in August (for the first time since May), the volume of citizens` cash foreign currency savings could grow even more in the second half of the year. It is quite probable, she believes, that if the ruble depreciates to 85-90 rubles per dollar by the end of December and average deposit interest rates fall to 11-13.5% annually, the total increase in Russian cash foreign currency holdings could reach 3-5% by year-end.
