Cuba’s central bank caused a stir with a surprising announcement on Monday: Cash deposits from US dollars can now be paid into Cuban bank accounts again. The acceptance freeze imposed on June 21, 2021 was lifted with immediate effect.
This means that, for the first time in two years, cash US dollars can again be used via bank deposits for purchases in foreign currency transactions. Since the summer of 2021, this has only been possible with other currencies such as the euro, pound or Canadian dollar. The reason for the ban on deposits at the time was Cuba’s renewed listing as a “state sponsor of terrorism”, as a result of which numerous banks refused to accept US dollars from Cuba. Despite this stigma, it is in the context of the “current economic situation, after the end of the pandemic and with the economy reviving […] advisable to take this step,” the central bank justified the measure.
Economy Minister Alejandro Gil put the move in the context of the opening of the foreign exchange market in August 2022, during which dollars can again be exchanged for pesos at a rate of 120:1 for the first time. However, the conditions are worse for the US dollar: while the purchase margin for other currencies is two percent, a fee of eight percent is due for every dollar exchanged.
“Now dollars can be deposited in banks and transferred to MLC cards, which previously was only possible with other currencies. We’re moving in the right direction.” tweeted Gil. MLC cards (“moneda libremente convertible”, freely convertible currency) are, along with international credit cards, the only valid means of payment in the country’s foreign currency shops.
The economist Pedro Monreal rated the measure as a late “band-aid” for the currency reform of January 1, 2021, with which the informal currency market is “washed” and at the same time the path of partial dollarization is continued. However, this is taking place entirely via bankarized channels, while physical dollar bills are likely to be further displaced. It remains to be seen how the informal currency market will react to the move.
Economist José Luis Perelló told Cuban news agency ACN that the measure would benefit recipients of remittances (“remesas”) from the United States and international tourism. Cash from family members and visitors from the United States can now flow back into the banking system. “Something that shouldn’t have been banned when the country opened its borders after the pandemic,” Perelló is quoted as saying by the agency.