Dual Currency in Cuba

Dual Currency in Cuba

As per the latest devaluation plan announced in December by President Miguel Diaz-Canel, the CUP’s artificial one-to-one parity with the U.S. dollar has been removed.
The currency will instead trade at 24 pesos to the greenback and the CUC will be phased out in six months.
The CUP is in circulation in the domestic economy and serves as the principal medium by which goods are priced and wages paid.

A dual domestic currency

During the turmoil in Cuba’s sugar industry and a plunge in nickel prices in the 1990s, a volatile CUP had fallen to 140 to the dollar. Against this backdrop, the CUC was introduced in 1994 as a unit of account and store of value, to prevent the country’s excessive reliance on the U.S. dollar following the end of the former Soviet Union. ‘
In recent years, this second currency has more or less steadied at one CUC to 24 CUPs in official exchange outlets and is the predominant mode of transaction for tourists and residents at high-end shopping outlets and other imported goods.
Apart from the disparities attributed to the prevalence of a dual domestic currency, Havana has at times had to deftly deploy the surge in dollar remittances and tourism to bolster the peso, by legalising the greenback in the 1990s.
It has also had to respond in kind to American sanctions at other instances, as when the government in 2004 imposed a 10% tax on the exchange of the dollar for CUCs.
Last July, Havana scrapped the 10% surcharge in a sequel to the 2019 opening of stores trading principally in dollars.
The recent shift is part of the government’s bid to boost dollar transactions alongside other hard currencies, especially after tourism was closed in the wake of the pandemic.
There is concern that the circulation of hard money could reinforce the segmentation and distortions of the past that resulted from access to the CUC for public sector companies at preferential exchange rates.

An important objective

The country’s switch back to a single currency was an important objective in the economic transformation plan envisioned in the 2011 Congress of the Communist Party of Cuba under former President Raul Castro.
Among the expected gains from a unified peso are transparency of firms in terms of costs and profits, higher economic productivity and incentives for exports.
Experts have opined that a corresponding devaluation of the peso was a necessary first step to discontinue the dual currency.
The government of President Diaz-Canel has sought to cushion the likely impact of high inflation resulting from the devaluation with a generous wage and pension hike for state employees, besides a roll-back of subsidies to state-owned firms.
There are concerns, however, that it could still leave a sizeable private and informal sector labour force exposed.
In addition, there is the real risk that the adverse effects from high prices could further incense protesters who have been demanding protection for civil liberties and artistic freedom following the detention of a well-known rap singer.
Predictably, the government has been quick to dismiss the voicing of dissent as U.S. interference in Cuba’s internal affairs. Havana must take citizens along in order to implement the new reforms.

Source: TH

Join Our Telegram

Status of Gender Inequality in India

FLIGHT LIEUTANANT BHAWANA KANTH

Rajasthan First State to Implement Biofuel Policy

02 Jul, 19
SHARE

Rajasthan First State to Implement Biofuel Policy: (GS-II(Policies) & GS-III(Environment)) Theme: Biofuel Policy Rajasthan has become the first State in the country to implement the national policy on biofuels unveiled by the Centre in May 2018. The desert State will lay emphasis on increasing production of oils

SEHAT Scheme for Teleconsultation

01 Feb, 22
SHARE

Services e-Health Assistance and Teleconsultation (SeHAT) is the tri-services teleconsultation service of the Ministry of Defense designed for all entitled personnel and their families. As part of the Government’s commitment to Digital India and e-Governance, Minister of Defense launched SeHAT on 27 May 2021. It has been a great exam

PM Poshan Scheme to replace Mid Day Meal Scheme

02 Feb, 22
SHARE

PM Poshan (Erstwhile Mid Day Meal) Scheme Cabinet has approved the Prime Minister POSHAN scheme or PM-POSHAN for providing one hot cooked meal in Government and Government-aided schools. The scheme will replace the existing national programme for mid-day meal in schools or Mid-day Meal Scheme (launched in 1995). It has been launched for a

National Initiative for Design Innovation (NIDI)

05 Feb, 22
SHARE

National Initiative for Design Innovation (NIDI) Government launched the scheme of “National Initiative for Design Innovation (NIDI)” in March, 2014. Scheme envisaged establishment of 20 Design Innovation Centres (DIC), One Open Design School (ODS) and One National Design Innovation Network (NDIN) across the country for promoti

Saffron cultivation in India

03 Feb, 22
SHARE

Saffron is a plant whose dried stigmas (thread-like parts of the flower) are used to make saffron spice. Saffron cultivation is believed to have been introduced in Kashmir by Central Asian immigrants around the 1st Century BCE. Pampore region, in India, commonly known as Saffron bowl of Kashmir, is the main contributor to saffron p