Large-scale monetary reform starts in Cuba

The Cuban authorities want to eliminate the system with a parallel circulation of two official currencies and link the Cuban peso to a single exchange rate. The country is expected to see a sharp increase in prices for goods and services.

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

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

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

As specified by Reuters, the changes are aimed at contributing to market changes in the economy. According to some experts, the existing dual system and multiple exchange rate bindings, in particular, served to obscure transactions with government subsidies.

Prices for goods and services are expected to rise sharply

In connection with the reform, the country is expected to see a sharp increase in prices for goods and services in various areas — from transport to electricity.

Cuba has had two official currencies since 1994 — the Cuban peso and the Cuban convertible peso, which since its introduction has been intended to replace the US dollar on the Republic’s territory. The official exchange rate of the convertible peso for citizens at the moment is one dollar or 24 Cuban pesos. For businesses — one dollar or one Cuban peso.

Unification of both Cuban currencies was planned for a long time, but economic reform did not advance. This was primarily due to the fear of uncontrolled hyperinflation.

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