CUC currency to be removed from circulation in June next year
Having operated a dual currency system for more than two decades, Cuba is ending the practice as of January 1 next year and will have only a single unified exchange rate of 24 pesos per dollar.
After postponing the decision for several years, Cuban President Miguel Díaz-Canel made the announcement late Thursday of the expected monetary unification between the island’s two currencies. Currently, Cuba has two currencies: the Cuban peso, in which state wages are paid, and the Convertible Cuban Peso, CUC, which is the local hard currency.
One CUC is equivalent to 25 Cuban pesos for the population. In making the announcement in a televised speech, the Cuban leader, flanked by his predecessor, former President Raul Castro, declared that 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”.
MOVE PART OF WIDER REFORM PACKAGE
This latest development comes as the socialist economy has been hurt by the slump in tourism income since the global pandemic began, compounded by the fact that Cuba was already suffering under the U.S. embargo. The unification of the currencies is part of a wider reform package which the government has said will also include modification of salaries, prices and subsidies.
Since 1994, foreigners in Cuba have mainly transacted using the CUC, pegged to the dollar, while locals mainly used the much weaker Cuban peso. With the change, the CUC will be removed from circulation in June next year.
NO DETAILS ON CUC REMOVAL PROCESS
The Cuban leader did not offer more details on how the process would be carried out nor did Castro make any remarks during the televised speech.
A new decree published yesterday establishes that the population will have up to 180 days to change their CUCs at the country’s banks and exchange houses. State-owned companies may receive temporary loans to mitigate the effect of the elimination of the double currency.
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”.
Commenting on the move, President of the U.S.-Cuba Trade and Economic Council, a New York think-tank, John Kavulich, argued that the currency unification is long overdue, but will be painful for Cubans, who receive part of their income in convertible pesos, since they will have their purchasing power eroded. He made the point that Cuba is implementing these painful reforms “during one of its bleakest moments”.
STATE SALARIES AND PENSIONS TO GO UP
Yesterday, the Cuban government published raises for state salaries and pensions. The monthly minimum state wage will increase from the current 400 pesos (US$17) to 2,100 Cuban pesos (US$88), while the minimum social security pension, currently at 300 pesos (US$13), will go up to 1,520 Cuban pesos (US$63).
A salaried journalist working for state media would earn 3,610 pesos a month, less than a high school teacher, who would make 4,010. Doctors with one specialty will make 5,560 pesos.