Durrant Pate/ Contributor

The Cuban peso hit an all-time low on the informal market on Tuesday as the currency crisis gripping the communist-run Caribbean island persists.

The peso traded at 400 to the US dollar, with the slide coming as the partial dollarisation of the state-dominated economy accelerates, deepening social tensions amid shortages of basic goods, runaway inflation, and a crumbling infrastructure and public services.

The import-dependent country’s government attributes the crisis largely to US sanctions that target foreign exchange earnings. These measures, officials tell Reuters, have contributed to an 11% contraction of the economy since 2019. 

Critics point instead to slow and incomplete economic reforms. In December, Prime Minister Manuel Marrero said partial dollarisation was necessary to capture U.S. currency already circulating within the country, describing it as part of broader efforts to stabilise the economy. 

Partial dollarisation means that the dollar replaces the peso for certain goods and services. Miami-based tracker, El Toque, widely used by Cubans to assess the peso’s real value, highlights that the peso has lost nearly 25 per cent of its value this year. 

The dollar traded at 305 pesos on January 1, 2025, compared with just 40 pesos when the tracker launched in 2021. The currency’s decline this year has coincided with government measures to expand well-stocked retail outlets that only accept convertible currency in cash, foreign credit cards, or a state-issued dollar card. 

These payment methods are also increasingly used in tourism, wholesale trade, and to pay customs duties. Government officials acknowledge that dollarisation and inflation have widened inequality in a country where about 40 per cent of the population lacks access to foreign currency through remittances or other sources. 

Those without dollars typically do not earn enough in state jobs or pensions to cover basic needs. Speaking at Cuba’s National Assembly last month, President Miguel Díaz-Canel told legislators, “to overcome this economic situation, we have been forced to accept the partial dollarisation of the economy. This benefits those who have capital or receive remittances, which in turn leads to an undesirable widening of social inequality.”

The Cuban government maintains a fixed exchange rate of 24 pesos to the dollar and a “discretionary” rate of 120 pesos, the latter increasingly used for exchanges with tourists and to set prices for subsidised goods and services such as public transportation and gasoline.

Meanwhile, the growing private sector is barred from accessing official foreign exchange and instead uses the informal rate to price its largely imported goods.