Cuba begins risky reform of two-currency system

Cuba is abandoning its two-currency system, a necessary but risky reform, after more than 10 years of debates on the subject.

REUTERS - STRINGER

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3 min

Monetary unification comes into effect in Cuba from January 1, 2021. Two currencies have been in circulation on the island for more than 20 years, but within six months only the Cuban peso will remain.

The abandonment of the two-currency system is not without risk and raises fears of high inflation, as Cuba goes through an unprecedented economic crisis. 

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With our correspondent in Havana

,

Domitille Piron 

Necessity rules!

This is how the Cubans explain that after more than ten years of debates on the essential reform of monetary unification, it is being implemented today, in an

economic context

of the most difficult for Cuba.

But this

two-currency system had

previously allowed state-owned enterprises to import at a preferential exchange rate.

So Cubans like Pepe, who does not want to give his name, fear high inflation: “

I am retired

,

 but I am working because I have to plan ahead, he

confides, worried. 

Because there will be price changes, the elimination of certain subsidies, so I have the feeling that it is better to plan ahead if we want to get by!

 "

During the next six months, the CUC, the convertible peso, will therefore disappear, to make way for the sole Cuban peso, whose rate has been set at 24 times 1 dollar.

The price of bread multiplied by 20 

And a series of reforms such as the increase in state wages and the eventual disappearance of the supply book will be implemented.

But if wages are multiplied by five, the price of bread, for example, is multiplied by 20. 

For workers in the private sector, like José Abreu, the concern is less because he will be able to pass this inflation on to the increase in his tariffs, even if the government has set a limit of increase of 300%: "

It was complicated to live with two currencies

, summarizes José Abreu,

so I believe that unification is a good thing for the country.

If the government takes these measures, it is for the good of all, because the economy has to improve and I believe that it will improve

.

"

Cuba therefore enters 2021 with a major and risky reform, which reassures no one, but which had become essential.

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