Article Link: https://www.aljazeera.com/economy/2021/1/1/what-will-cubas-new-single-currency-mean-for-the-island
The Cuban government has recently announced that it will be getting rid of its dual currency system and devaluing its peso, meaning that many people will encounter economic hardship in the coming months.
A dual currency system is often used when a country’s currency is seen as unstable, subject to inflation, or untrustworthy. In these instances, people will start to use another currency alongside it (unofficially) in order to buy different types of goods. After the collapse of the Soviet Union, Cuba officially legalized the use of the US dollar alongside the Cuban Peso (CUP).
The CUC, or Cuban convertible peso, is the currency that is used alongside the Cuban peso and is equal in value to the US dollar. Most Cubans in the tourism industry are paid in CUCs.
Just recently, Cuba announced that it would be returning to only using CUPs, and that everyone has until June to trade in their CUCs. At the same time, they are also devaluing the CUPs (for the first time since 1959), which means that people are going to lose a lot of money in the process. Even worse, people working in the tourism industry who are paid in CUCs will be most affected, even after the pandemic has devastated their jobs.
Overall, it’s going to be an incredibly difficult transition for many people, though it will probably make things a lot less complicated in the long run just having one form of currency. Cuba isn’t the only country facing issues like this, as Venezuela – one of its main supporters – is also suffering with extreme inflation and US sanctions.
Cuba’s tourism industry is also expected to continue to decline, as new restrictions require everyone entering the country to have a negative COVID test. Though a necessary safety precaution, it will harm the Cuban economy nonetheless.
Overall, economic issues can be seen all around the world at this time, and it is up to the global community to come together and give aid when needed. Now is a time when intergovernmental organizations like the IMF have the potential to come through and present clear plans to get suffering economies (like Cuba’s) back on track. Regardless, economic trials are not foreign to Cuba, they are not alone, and their struggles will hopefully wane as an effective vaccine comes into the picture.