Havana (Reuters) – Cuba said on Wednesday that it would start buying dollars and other convertible currencies on Thursday at almost five times the current rate. This is to compete with the informal money market and get the money.
On Wednesday night, Central Bank President Marta Wilson Gonzalez said on state-run TV that the state-run banking system had set a new rate of 120 pesos to the dollar. This is compared to the official fixed rate of 24 pesos and the informal rate of 115 pesos, according to El Toque Tracker, the most watched independent online news outlet in the communist-run country.
Gonzalez said that the new rate would change over time and wouldn’t affect most of the state-run economy, which would still use the fixed rate that has been in place for more than 18 months.
Cuba stopped taking dollars in 2020 because of U.S. sanctions. Soon after, it stopped selling convertible currency for pesos to the public because it said it didn’t have the money.
Economy Minister Alejandro Gil told the president of the central bank on Wednesday that he hoped currency exchanges would start up again soon, but that the first step would be to take over the informal market.
“Right now, a lot of foreign money is coming into the country, but the national financial system isn’t catching it,” he said.
Hit by harsh new U.S. sanctions, the pandemic, and high international prices for goods and shipping, the economy, which is almost bankrupt and depends on imports, grew by 1.3% last year after falling by 10.9% in 2020. Gil said that the slow but steady recovery was still going on, but he didn’t give numbers.
In the past few months, there have been scattered protests because of a lack of food, medicine, fuel, and now electricity.
Pavel Vidal, a former economist at Cuba’s central bank who now teaches at Colombia’s Pontificia Universidad Javeriana Cali, said that the change addressed a major complaint from tourists who had changed money at the fixed government rate in hotels but then found that everything on the street was priced at the informal rate.
Vidal said that it would also help “the private sector, which often gets foreign currency from tourists, and that banks will once again accept and exchange physical dollars at 120, which removes one of the biggest barriers to remittances, which were worth 24 pesos.”
