On Monday, Cuba’s economy minister urged calm. It is because government prepares to unify multiple exchange rates and its dual currency system. It is in hopes of improving economic performance.
An onslaught of new United States sanctions on top of a decades-old embargo, its inefficient Soviet-style command economy, and the pandemic caused the Caribbean island nation’s crisis.
Alejandro Gil spoke during a prime-time broadcast on state-run television. So, Gil said that the country could not overcome the crisis without unification. Thus, it included pension, wage, and other measures to protect the population.
Gil said that it is a profound transformation that the economy needs. Thus, it will impact practically everyone and companies.
Furthermore, he added that it is for the good of the economy and their people. It is because it will create favorable economic conditions. Those conditions will reverberate through more jobs, production, and services.
Before the end of the year, the monetary reform must come. It will eliminate the convertible peso while leaving a devalued peso. The peso if officially exchanges since the 1959 Revolution at one peso to the dollar.
Economy of Cuba
The convertible peso is at one to ten pesos to the dollar for state companies, and 24 pesos sell and twenty-five pesos buy with the population.
Nevertheless, the government states that the resident will have time to exchange convertible pesos at the current rate when it is out of circulation. Furthermore, the bank will automatically do the same with convertible peso accounts.
Last week, President Miguel Diaz-Canel talked with the media. He said that the country would end up with a single currency and exchange rate with the dollar. Nevertheless, he did not tell the date devaluation would happen on what the rate might be.
Domestic and Foreign economists anticipate the move will cause bankruptcies and triple-digit inflation. Nevertheless, at the same time, it will stimulate exports over imports and boost the domestic efficiency of the economy.
The state sets most prices and wages. Moreover, it controls the lion’s share of the economy. Nonetheless, neither domestic currency is tradable outside Cuba.
Gil said that there would be no shock therapy there. They will protect the vulnerable. Simultaneously, it will favor the need to work to live, and it will favor motivation to work.
A decade ago, the Communist Party approved the market-oriented reforms. Nevertheless, they never implemented it, including monetary measures. Thus, in July, Diaz-Canel announced that they would be quickly put in place in response to the crisis.