Extensive lines can be seen outside banks and ATMs in Havana and surrounding areas, beginning early in the morning as individuals line up to withdraw cash for everyday purchases like groceries and other necessities.
There are multiple factors contributing to the scarcity, all interconnected with Cuba’s severe economic downturn, which is considered one of the most severe in recent history.
Omar Everleny Perez, a Cuban economist and university professor, points to the government’s expanding fiscal deficit, the absence of banknotes exceeding 1,000 pesos (approximately $3), persistent high inflation, and the failure to return cash to banks as the primary factors contributing to the current economic challenges.
“There is money, yes, but not in the banks,” said Perez, adding that most of the 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.
This, Perez says, is either because they don’t trust the local banks or simply because they need the pesos to convert into foreign currency.
The majority of Cuban entrepreneurs and small business proprietors are compelled to import nearly all of their merchandise or pay for their business supplies in foreign currency. As a result, a significant number of them resort to accumulating Cuban pesos with the intention of exchanging them for foreign currency on the informal market at a later time.
However, converting these Cuban pesos into other currencies presents an additional obstacle due to the existence of numerous and highly volatile exchange rates on the island.
The official rate used by government industries and agencies is 24 pesos to the U.S. dollar, the exchange rate for businesses is 120 pesos to the dollar, whereas on the black market, the dollar can be exchanged for as much as 350 Cuban pesos.
Omar Perez notes that in 2018, 50% of the cash in circulation was in the hands of the Cuban population and the other half in Cuban banks. But in 2022, the latest year for which information is available, 70% of cash was in the wallets of individuals.
The shortage of cash comes as Cubans navigate through a complicated monetary system that involves the circulation of multiple currencies, including a digital currency called MLC, established in 2019.
Then, In 2023 the government introduced a series of initiatives with the objective of encouraging a “cashless society.” These measures mandated the use of credit cards for certain transactions, such as buying food, fuel, and other essential goods. However, numerous businesses have chosen to decline accepting credit cards despite the government’s efforts.
Worsening the situation is extremely high inflation rate, meaning more and more currency notes needed to purchase goods.
According to official figures, inflation stood at 77% in 2021, then dropped to 31% in 2023. But for the average Cuban, the official figures barely reflect the reality of their lives, since market inflation can reach up to three digits on the informal market. For example, a carton of eggs, which sold for 300 Cuban pesos in 2019, these days sells for about 3,100 pesos.
Cuban monetary authorities did not give any official statement on this situation yet. The scarcity of physical money has grown frustration among Cubans, and questions about the institutional silence regarding the causes of the new crisis.
