Cuba will end its decades-old dual currency system and have a single unified exchange rate of 24 pesos per dollar from January, President Miguel Diaz-Canel said.
Streamlining the currency system will put the country on a sounder footing “to go ahead with the transformations that we need to update our economic and social model,” Diaz-Canel said in a televised speech on late Thursday, accompanied by former president Raul Castro.
A partir del primero de enero de 2021 comienza la Tarea ordenamiento, aplicándose una tasa de cambio de 24 pesos MN por 1 dólar, informó el Presidente de #Cuba en comparecencia especial, acompañado por el General de Ejército Raúl Castro, Primer Secretario del Partido Comunista pic.twitter.com/s9wDQvmnV9
— Presidencia Cuba (@PresidenciaCuba) December 11, 2020
The socialist economy has been hurt by the slump in tourism income since the pandemic began, and was already suffering under the U.S. embargo. The unification of the currencies is part of a wider reform package which the government has also said will also include modification of salaries, prices and subsidies.
Since 1994, foreigners in Cuba have mainly transacted using the Convertible Cuban Peso, or CUC, pegged to the dollar, while locals mainly used the much weaker Cuban peso. The change will take effect from Jan. 1 and the CUC will be removed from circulation in June.
Currency unification is long overdue, but it will be painful for Cubans who receive part of their income in convertible pesos, since they’ll have their purchasing power eroded, said John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, a New York think-tank.
Cuba is implementing painful reforms “during one of its bleakest moments,” Kavulich said in a phone interview.
Diaz-Canel had announced the unification in October. The modification also potentially opens the door to a fluctuating exchange rate. In the Official Gazette announcing the new rules, the government said the value of the peso will be determined by the Central Bank of Cuba and the exchange rate will be “published daily on its website.”
(Updates to add quote from U.S.-Cuba Trade and Economic Council in 5th paragraph; adds context throughout)