By Isaac Risco
HAVANA TIMES — The Cuban government announced Tuesday its long-awaited reform to abolish the dual currency prevailing in the island since the 90s, but did not set specific dates for concluding the process.
The Cabinet decided to “put into effect a calendar for implementation of measures that will lead to monetary and exchange rate unification,” reported dpa news in the aftermath of a meeting of the Council of Ministers presided by President Raul Castro on Saturday.
The elimination of the dual currency has been under consideration for some time as one of the next steps in the economic reform process taking place in recent years.
The reforms aim to “update” the Cuban economic model with market elements. However in the words of Raul Castro, they exclude the use of “shock therapy”.
Introduced in 1994, during the “special period” crisis when Cuba opened to mass tourism,
the island has operated with two currencies, the regular Cuban peso (CUP), in which virtually all workers are paid wages and pensions, and the convertible peso (CUC), whose exchange is equated to the dollar and is 25 times that of the CUP.
The CUC then joined the US dollar as a medium of payment allowed on the island. In 2004 the dollar was withdrawn from Cuban commerce to let the CUC be the only official hard currency acceptable for payment in Cuba.
Although the state subsidizes basic services, many imported products are paid for in the hard currency CUCs, as well as internet fees in public facilities.
Many economists believe that the dual currency distorts accounting and hampers economic productivity on the island.
Monetary unification “is not a measure that will resolve all the current economic problems, but its implementation is essential to ensure the restoration of the value of the Cuban peso,” noted the official Granma newspaper on Tuesday.
President Raul Castro had reaffirmed in early July his government’s plans to abolish the dual currency, first announced in 2008 as part of the economic reform agenda. “The phenomenon of the dual currency is one of the major obstacles to the progress of the nation,” Castro told the Cuban parliament.
The dual currency system divides the population into those who draw their salaries or pensions in CUP and those who have access to CUC, usually tourism workers, the emerging private sector or people who receive remittances from abroad.