Overview
An increasing number of people in Cuba are facing a severe shortage of cash for daily transactions, leading to long queues outside banks and ATMs in Havana. Experts attribute this crisis to various factors linked to the country’s economic downturn.
Reasons Behind the Cash Shortage
According to Cuban economist Omar Everleny Perez, the main reasons for the cash shortage crisis are:
- Government’s growing fiscal deficit
- Nonexistence of banknotes with a denomination greater than 1,000 Cuban pesos
- Stubbornly high inflation
- Nonreturn of cash to banks
Hoarding of Pesos
Entrepreneurs and small business owners in Cuba often hoard Cuban pesos due to the need to import goods and pay for supplies in foreign currency. This hoarding behavior contributes to the scarcity of cash in circulation.
Foreign Currency Exchange Challenges
Converting Cuban pesos to foreign currencies poses challenges due to fluctuating exchange rates. While the official rate is 24 pesos to the US dollar for government entities, individuals face a rate of 120 pesos to the dollar. On the informal market, the exchange rate can reach up to 350 pesos per dollar.
Implications
The shift of cash from banks to individuals has disrupted the traditional circulation of money, impacting the overall liquidity in the economy. This trend raises concerns about financial stability and accessibility to cash for essential transactions.