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Cuba will put an end to its current system of two local currencies, the only one in the world and in force for 26 years, with a unification process starting in January 2021, informed President Miguel Díaz-Canel.
In addition, the island is preparing to carry out strong corrections in its economy.
It is a “Ordering Task”, which includes six basically financial actions planned and approved since 2013, and which awaited a better economic moment for their application, but that are already unavoidable.
The authorities have revealed some details to try to reassure the population, ensuring that It is not a neoliberal adjustment program, and that “no one will be left helpless.”
However, the lack of precision and the complexity of the problems arouse concerns in the population and alerts from the academy about possible inflationary processes, which the government admits as a risk.
These are the planned actions:
Elimination of the convertible peso (cuc)
Cuba has had two currencies for 26 years.
He Cuban peso (cup), used by the state to pay salaries and collect basic services; and the convertible peso (cuc), whose value is equal to the dollar and is equivalent to 24 cup.
With this measure the authorities seek eliminate some distortions in the economy and social inequalities.
Unification of exchange rates
Perhaps this is the most important and sensitive measure, since it is what allows a equilibrium between the domestic economy and the foreign market, on which Cuba is highly dependent.
There are currently two main exchange rates. One for state-owned companies (corresponding to 85% of the economy), which is a dollar valued cup and which causes great distortions and imbalances in the economy.
The other rate, valid for the general population, is a dollar equivalent to 24 cup. This will be the one that prevails as the single rate, reported Díaz-Canel, which will have direct and immediate consequences both for the macroeconomy and later for small households.
Devaluation
With the new single exchange rate of 24 cup per dollar, there is a substantial devaluation of the currency national versus the US currency for the business sector.
Price increase
The authorities announce that there will be a general increase in prices and although they have not said its amount, it is expected to be remarkable.
According to the official announcement, the details will be reported in the coming days.
Elimination of subsidies
The Cuban economy has been sustained with numerous state subsidies, both to maintain the inefficient state business system, and for the daily lives of workers.
It is stated that the vast majority of these grants will be eliminated and that only some supports remain, such as the price of milk for children and medicines for chronic diseases.
Increase in wages and pensions
To balance all of the above, the government is planning a 450% average increase in salaries and 500% in pensions. To do this, the authorities have determined a basic basket, the amount of which they have not disclosed.
From that basket, the minimum wage that will be in force in the country will be set from then on.
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