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Cuba unifies its currency to deal with economic crisis | https://knappily.com/world/cuba-unifies-its-currency-to-deal-with-economic-crisis-259 | @Knappily – when you want to know all in 2 minutes

What does the single currency system entail?

The Cuban government formally ended its dual currency system on Dec. 31, devaluing its peso for the first time since the 1959 revolution that swept the late Fidel Castro to power.

The government has set the exchange rate at 24 Cuban pesos to $1, and the convertible Cuban peso, known as the CUC, will be phased out completely by June, leaving the island with one currency for the first time in more than 20 years. Cubans will have through June 2021 to trade in CUCs for Cuban pesos, according to a decree published in the Cuban government’s official gazette on December 10.

The CUC has historically been used for state business and buying goods from abroad, but it can’t be taken out of the country. It is pegged 1:1 to the dollar but exchanged with the public at a rate of 24 to buy and 25 to sell. The CUP is still used for everyday domestic transactions, and many Cubans are paid their wages in CUPs.

In announcing the currency unification plan, the Cuban government said it would publish the exchange rate for the Cuban peso daily on the Central Bank’s website, meaning that it could potentially fluctuate rather than stay at its fixed rate. That’s also new for the island.

In a speech last month, Cuban President Miguel Diaz-Canel said the reforms were necessary “to go ahead with the transformations that we need to update our economic and social model.” He had also cautioned that the measure was not a magic bullet that would solve the country’s economic problems, but would help pave the way. The socialist economy has been hurt by the slump in tourism income since the pandemic began, and was already suffering under the U.S. embargo.

The unification of the currencies is part of a wider reform package which the government has also said will also include modification of salaries, prices and subsidies.