Cuba’s central bank caused a stir a couple of days ago with a surprising announcement: With immediate effect, cash deposits of U.S. dollars can once again be made into Cuban bank accounts. The acceptance stop imposed on June 21, 2021 was lifted with immediate effect.
This means that for the first time in two years, cash U.S. dollars can again be used for purchases in foreign currency transactions via bank deposits. Since summer 2021, this had only been possible with other foreign currencies such as euros, pounds or Canadian dollars. The reason given for the deposit ban at the time was Cuba’s re-listing as a “state sponsor of terrorism,” as a result of which numerous banks refused to accept U.S. dollars from Cuba. Despite this stigma, in the context of the “current economic situation, after the end of the pandemic and with the revival of the economy […] it was advisable to take this step,” the Central Bank explained the measure.
Economy Minister Alejandro Gil put the move in context with the opening of the foreign exchange market in August 2022, during which dollars can be exchanged for pesos again for the first time at the rate of 120:1. However, the conditions are worse for the U.S. dollar: while the purchase margin for other foreign currencies is two percent, a fee of eight percent is charged for each dollar exchanged.
“Now dollars can be deposited in banks and transferred to MLC cards, which was previously only possible with other foreign currencies. We are moving in the right direction,” Gil tweeted. MLC cards (“moneda libremente convertible”, freely convertible currency) are the only valid means of payment in the country’s foreign currency transactions, along with international credit cards.
Economist Pedro Monreal assesses the measure as a late “band-aid” for the currency reform of January 1, 2021, which will “wash” the informal currency market while continuing the path of partial dollarization. However, this will take place entirely through bankarized channels, while physical dollar notes 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 the Cuban news agency ACN that the measure would benefit recipients of remittances (“remittances”) 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 should not have been prohibited in the first place when the country opened its borders after the pandemic,” Perelló is quoted by the agency.
This article was first published on Cuba Heute, a German-language news portal.