Cash Crunch in Cuba: Long Lines and Growing Frustration

The Cash Conundrum in Cuba: Navigating the Island’s Monetary System

Havana – Alejandro Fonseca found himself in a relatable yet frustrating situation – standing in line for hours outside a bank in Havana, only to be met with disappointment as the ATM ran out of Cuban pesos right before his turn. This scenario is becoming increasingly common for Cubans like Fonseca who are struggling to navigate the complexities of the island’s monetary system, exacerbated by a shortage of cash. The root causes of this cash crunch, as pointed out by Cuban economist and university professor Omar Everleny Pérez, include the government’s expanding fiscal deficit, the absence of banknotes with a denomination exceeding 1,000 Cuban pesos, persistent high inflation, and a reluctance among entrepreneurs and business owners to return cash to banks.

Pérez highlighted a crucial point – while money exists in the economy, a significant portion of it remains outside the formal banking sector, predominantly in the hands of entrepreneurs and small- to medium-sized business owners who are more inclined to hold onto cash acquired through commercial transactions rather than depositing it back into the banking system. Consequently, many individuals resort to hoarding Cuban pesos with the intention of later exchanging them for foreign currency on the informal market, where the dollar can command up to 350 Cuban pesos. In 2018, half of the cash in circulation was held by the Cuban populace, while the remaining half sat in Cuban banks, painting a stark picture of the country’s cash distribution dynamics.

As Cubans grapple with the shortage of cash, they are also contending with a convoluted monetary framework that features the circulation of multiple currencies, including the introduction of a virtual currency known as MLC in 2019. The discrepancy between official inflation figures and the actual cost of living on the ground is staggering, with market inflation soaring into the triple digits on the informal market. A stark example of this disparity is the astronomical surge in prices, such as a carton of eggs that skyrocketed from 300 Cuban pesos in 2019 to a jaw-dropping 3,100 pesos presently. This surge comes at a time when the monthly salaries of Cuban state workers hover between 5,000 and 7,000 Cuban pesos, underscoring the profound economic challenges faced by ordinary Cubans.

In the midst of these economic struggles, Cuban monetary authorities have yet to address the pressing issue of cash shortages, leaving many citizens grappling with financial uncertainty and limited access to funds. The cash conundrum in Cuba serves as a stark reminder of the intricate web of challenges embedded within the country’s monetary system, underscoring the urgent need for comprehensive reforms to alleviate the burden on everyday citizens. As Cubans navigate these turbulent financial waters, the resilience and adaptability of the population shine through, reflecting a steadfast determination to weather the storm amidst economic uncertainties.