Cuba's president to drop its dual currency system Jan. 1

Cuba will unify its monetary system on New Year's Day, President Miguel Díaz-Canel announced Thursday evening, closing the door on more than 25 years with two national currencies in circulation.

Díaz-Canel said in a national radio and television broadcast that the country will revert to using its peso, which has an official exchange rate of 24 for a U.S. dollar. It will drop the convertible peso, which is worth about $1.

Government officials for several years had conceded the difficulties of having the two currencies and different exchange rates, but they made no move to impose a reorganization because of worries about the potential negative impact, including inflation.

Most Cubans have been paid in the regular peso, which is worth about four cents. The stronger currency was introduced as a replacement for the dollars traded on the black market during the island’s post-Soviet economic crisis in the 1990s.

Over time, the communist government used the two currencies to set extremely low prices for goods and services considered basic rights and extremely high prices for others considered luxuries, creating distortions that hindered economic growth. It also bred resentment at Cubans who worked in tourism and had access to the stronger currency.

Cuba is suffering a severe economic crisis arising from its unproductive economy and sanctions imposed by U.S. President Donald Trump to pressure the government.

The monetary change “will put the country in a better position to carry out the transformations” needed for strengthening the economy, the president said, though he conceded the change will not be a “magic solution to all the problems.”

Image credits: AP