Large-scale monetary reform begins in Cuba

The Cuban authorities want to eliminate the system of parallel circulation of two official currencies and link the Cuban peso to a single exchange rate.

In Cuba, on Friday, January 1, a large-scale monetary reform will begin, designed to eliminate the system with parallel circulation of two official currencies and to link the Cuban peso to a single exchange rate.

The reform was announced on December 10 by Cuban President Miguel Díaz-Canel, who has led the country since October 2019.

“All the conditions have been created to begin to rationalize the monetary system as of January 1, 2021, with a single exchange rate of 24 Cuban pesos per dollar,” said the head of state.

As Reuters clarifies, the changes are aimed at facilitating market changes in the economy. According to various experts, the existing dual system and multiple exchange rate parities, in particular, served to overshadow transactions with government subsidies.

In connection with the reform in the country, a sharp increase in the prices of goods and services is expected in various areas, from transportation to electricity.

Since 1994, Cuba has had two official currencies in circulation, the Cuban peso and the Cuban convertible peso (CUC), which since its introduction was aimed, in particular, to replace the US dollar in the country.

The US currency was withdrawn amid US sanctions. Convertible pesos were used to pay, in particular, to foreign tourists arriving in the country. The dollar against the Cuban peso was approximately 1:24, while the convertible CUC was 1: 1 per dollar, a rate that has remained unchanged since the 1953-59 Cuban Revolution.

Government employees also received a portion of their salaries in convertible pesos, considered hard currency and offering a variety of benefits.

The unification of both Cuban currencies had been planned for a long time, but the economic reform did not advance. This was mainly due to fear of uncontrolled hyperinflation.

Source: DW Russian Service