The Cuban government has initiated a new currency exchange system aimed at increasing flexibility in the foreign exchange market, aligning with the partial dollarization of the economy amidst the severe crisis gripping the island. Prime Minister Manuel Marrero Cruz outlined the specifics of this mechanism, which the government claims is designed to enhance the management, control, and allocation of foreign currency to the country's economic players, according to the state-run media outlet Cubadebate.
The prime minister stated, "This new system will allow for greater variability in the exchange rate, adapting to changing conditions of currency supply and demand, which means the exchange rate can fluctuate." However, the measure involves a complex process with the participation of various sectors, including state, non-state, and the general population, and involves multiple exchange rates, complicating life for many residents.
"The new currency exchange regime assumes greater flexibility in the exchange rate, establishing that the rate should vary when currency supply and demand conditions change. This is a complex process due to the involvement of all economic actors," Marrero Cruz explained during his announcement.
The government also touched on the issue of partial dollarization, set to commence in several strategic sectors of Cuba's struggling economy. In this context, the use of foreign currency has been authorized for wholesale and retail sales, tariff payments, foreign trade services, and non-state management forms. Additionally, payments for exportable products and agricultural goods substituting imports will also be conducted in foreign currency.
In the tourism sector, the government will allow the acceptance of foreign currency cash in establishments such as Casas del Habano, pharmacies, optical stores, international clinics, airports, and other authorized locations. This move is expected to facilitate foreign currency transactions and contribute to the inflow of foreign exchange into the country, according to the regime.
Paradoxically, just as it announces the implementation of partial dollarization, the government reaffirmed its policy to progress towards the de-dollarization of the Cuban economy. Marrero Cruz acknowledged the existence of an informal currency market outside state control and blamed it for the phenomenon of illegal dollarization in the country. Through this reform, he claimed that the government aims to regulate and more effectively control the use of foreign currency, minimizing the impact of the black market.
Experts caution, however, that this process could present additional challenges, such as price fluctuations and inequality in access to foreign currency.
Impact of Cuba's New Currency Exchange System
What is the purpose of Cuba's new currency exchange system?
The new system aims to increase flexibility in the exchange rate, adapting to changing conditions of currency supply and demand, enhancing management and allocation of foreign currency.
How will partial dollarization be implemented in Cuba?
Partial dollarization will involve the use of foreign currency in strategic sectors, including wholesale and retail sales, tariff payments, and certain tourism-related transactions.
What challenges might arise from this new currency system?
The new system might lead to challenges such as price fluctuations and unequal access to foreign currency among the population.