In Havana, long lines outside banks and ATMs have become a common sight as residents like Alejandro Fonseca experience the daily struggle to access their hard-earned Cuban pesos.
Associated Press (AP) reported that after spending hours in line, Fonseca’s frustration mounted when the ATM ran out of money just before his turn, forcing him to travel to another bank branch where he ultimately succeeded in withdrawing cash, albeit after wasting his entire morning.
The roots of the cash shortage
Cuba’s economy is facing one of its worst crises in decades, marked by a severe cash shortage that affects everyday transactions from buying groceries to paying for services.
According to experts, this issue stems from a combination of factors including a significant fiscal deficit, the absence of high-denomination banknotes, rampant inflation, and and the non-return of cash to banks.
Omar Everleny Pérez, a Cuban economist and university professor reported that cash is being held not by salaried workers, but by entrepreneurs and owners of small- and medium-size business who are more likely to collect cash from commercial transactions but are reluctant to return the money to the banks.
The impact of currency conversion challenges
The complexity of Cuba’s monetary system is exacerbated by the need for currency conversion. Entrepreneurs who need to import goods or pay for supplies in foreign currencies are particularly affected.
With multiple fluctuating exchange rates, converting Cuban pesos to foreign currency is a fraught endeavor.
Officially, the rate stands at 24 pesos to the US dollar for government transactions, but on the street, the rate can soar as high as 350 pesos per dollar.
The shift toward a “Cashless Society”
In response to the ongoing economic challenges, the Cuban government has been pushing for a transition to a cashless society, mandating the use of credit cards for certain transactions.
However, many businesses resist this change, continuing to demand cash amid soaring inflation rates that render electronic transactions less practical and accessible.
The real cost of inflation
Inflation continues to be a formidable challenge, with official rates significantly understating the day-to-day reality faced by the Cuban populace.
Prices on the informal market can be exorbitantly high, with basic items like a carton of eggs increasing tenfold in price over just a few years.
This inflation, combined with stagnant wages, places a severe burden on Cuban families, who must navigate multiple currencies and exchange rates in an already complex economic landscape.
