Cuba approved a plan to gradually unify its dual monetary system, a statement carried by official newspaper Granma revealed yesterday. The measure is part of a set of reforms adopted by the Communist Party in 2011 aimed at introducing market mechanisms and decentralizing the Cuban economy. “(Unification) is imperative to guarantee the reestablishment of the Cuban peso’s value and its role as money, that is as a unit of accounting, means of payment and savings,” the official statement said.
Cuba has had two currencies since the collapse of the Soviet Union in 1994 when the country introduced the U.S. dollar as its second currency. Cuba’s monetary system currently consists of the peso (CUP)—in which most wages are paid and local goods are priced—and the convertible peso (CUC), used in the tourism industry and foreign trade. Introduced in 2004, the CUC is pegged to the U.S. dollar and is currently valued at 25 pesos at exchange offices. However, companies must exchange dollars and CUCs with the government at the official exchange rate of one peso.
Last July, Cuban President Raúl Castro recognized that the dual currency is one of the “greatest obstacles for the country’s progress.” The system greatly complicates accounting, the evaluation of performance, and trade in the island. It is also very unpopular as sought-after imported goods—such as toothpaste and cooking oil—are far from reach to those who earn their salaries in pesos.
According to Cuban economists, the unification of the two currencies will take up to 18 months, and will involve devaluing the CUC and slightly revaluing the peso. The government has not provided a timetable for the reforms, but it has already begun adjusting the official exchange rate by allowing some companies to exchange dollars earned abroad for up to 12 pesos instead of one. The Cuban central bank has pledged it will back both currencies during the process to give Cubans enough time to convert their savings.