Cuba has announced that on Thursday it will begin acquiring dollars and other convertible currencies. The dollar/ peso exchange would occur at a rate almost five times higher than the current rate. This is an effort to compete with the black market and collect the funds.
Cuba has declared that it will begin acquiring dollars and other convertible currencies on Thursday. The Dollar to Peso exchange would happen at a rate that is about five times higher than the rate that is now in effect. This is an effort to undercut the informal money market and to collect the funds.
Cuban President Gonzalez talks about the dollar peso exchange rate
According to an independent online news outlet El Toque tracker (the most watched in the communist-run country) the President of the Central Bank, Marta Wilson Gonzalez, made an appearance on state-run television on Wednesday evening.
The President announced that the state-run banking system had set a new rate of 120 pesos to the dollar. This is in comparison to the official fixed rate of 24 pesos, which has remained the same for years, and the 115 pesos that are currently being offered.
Gonzalez stated that the new rate would be variable, and that it would not apply to the majority of the state-dominated economic activity, which would continue to function at the fixed rate that has been in existence for more than 18 months.
Why was the exchange rate changed?
Cuba stopped taking dollars in 2020, claiming sanctions imposed by the United States. Shortly thereafter, it stopped selling convertible currency for pesos to the general people, stating that it simply did not have the funds.
Will Cuban Peso overcome the fall in exchange rate anytime soon?
While speaking with the head of the country’s central bank on Wednesday, the Minister of the Economy, Alejandro Gil, stated that he wanted to resume currency exchanges in the near future, but that the first step would be to capture the informal market. “Today there is a high level of foreign currency that is entering the country that is not being captured by the national financial system,” he said.
Hit by tough new U.S. sanctions, the epidemic, and current high international pricing for products and shipping, the import-reliant, near-bankrupt economy increased by 1.3% in 2018 and will fall by 10.9% in 2020. Gil stated that a gradual, if slow, recovery continued, without providing numbers.
Problems caused due to the fall in Peso/Dollar ratio
According to Pavel Vidal, a former Cuban central bank economist who currently teaches at Colombia’s Pontificia Universidad Javeriana Cali, the measure addressed a major complaint of tourists. These tourists exchanged money at the fixed government rate in hotels. He discovered that outside on the street everything is pegged at the informal rate. He said that the measure was implemented to address this issue.
Dollar/ Peso exchange rate nearly quadrupled by Cuba. State-run banking system had set a new rate of 120 pesos to the dollar. This is in comparison to the official fixed rate of 24 pesos, which has remained the same for years. Cuba stopped taking dollars in 2020, claiming sanctions imposed by the United States. The import-reliant, near-bankrupt economy increased by 1.3% in 2018 and will fall by 10.9% in 2020. Economy Minister Alejandro Gil stated that a gradual, if slow, recovery continued.
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