Cuban Prime Minister Manuel Marrero admits that the foreign exchange market mostly operates irregularly
14ymedio/EFE, Madrid, 18 December 2024 (delayed translation) — Prime Minister Manuel Marrero acknowledged on Wednesday that citizens have lost confidence in the Cuban state banking system. In his speech before the National Assembly of People’s Power, he said that the government is going to introduce a new exchange rate regime in the country – compared to the current one with a fixed exchange rate – with “greater flexibility”, which varies according to the “conditions of supply and demand” and with “a daily rate,” with the objective of allowing the state to compete in the exchange business, which currently occurs mostly irregularly.
He did not, however, indicate when it will come into effect or what the initial exchange rate between the Cuban peso and the dollar will be. Cuba has two official exchange rates, one for legal entities (24 pesos to the dollar) and another for individuals (120 pesos to the dollar), but on the street, the greenback is currently being exchanged for about 320 pesos.
“It is a process that will take place little by little, but it will allow us to fully enter and ensure that the bank is not on the margin of this illegal exchange market,” added the head of the Government. The aim is for “people” to feel “attracted” and “more confident” to “sell their foreign currency to the banking system” and for the latter “to be able to sell foreign currency to the population.”
Likewise, the Prime Minister assured that the Government will approve allowing companies, with prior state authorization, to charge for their products and services in foreign currency. “We must recognize that the economy has been dollarized based on the existence of an illegal exchange market, even every time a price is set” in a private business “and the informal market rate is taken as a reference,” he argued. “Obviously, even if you are paying with national currency, that is dollarized.”
He also criticized the high circulation of cash in the economy, despite the intense campaign initiated by the Government since 2023 to digitize transactions. According to preliminary data shared by Marrero, there was a 26% year-on-year increase in the number of banknotes in circulation, a factor, he said, that “impacts inflation rates.”
The Government feels “dissatisfied”, he also said, with the progress of the guidelines, which include the reduction and elimination of subsidies.
Reviewing the anti-crisis measures announced a year ago and implemented in 2024, the Prime Minister also conceded that economic policy has not “progressed as necessary” and has only yielded “discreet results.”
The government is “dissatisfied,” he said, with the progress of the guidelines, which include the reduction and elimination of subsidies (which resulted, among other things, in a 400% increase in the price of fuel) and broad cuts to public spending. Despite the results, Marrero said that “there is no turning back on the path of eliminating subsidies.”
On the other hand, he said that the ravages of hurricanes Oscar and Rafael and the two major earthquakes in Granma province have depleted public finances in 2024 and limited the State’s ability to maneuver in the midst of a “war economy.”
Another measure that did not achieve positive results was the increase in the electricity bills of large consumers, said Marrero. “It did not achieve the expected reduction in consumption. On the contrary, it increased,” he admitted, which is why the new decree was approved so that these “large consumers” produce 50% of the energy they use from 2028, just as new investments and projects must be incorporated into this savings plan.
The country is experiencing a precarious situation with its electrical system, which suffered three total collapses at the end of the year.
In this regard, the head of the Government pointed out that by 2025 the Island will generate 1,200 megawatts (MW) through photovoltaic parks, just under half of the total demand.
On the other hand, Marrero said that Cuba has collected nearly 40.8 million dollars in fines from private companies that did not respect the price cap on products such as sausages, milk and chicken announced this year.
He also attacked private companies that, in his opinion, have sold products at a higher price by using the exchange rate with the dollar on the informal market as a reference.
He also warned: “the supervision of large businesses with evasive behavior will be a priority in the next period.”
He also warned that “the supervision of large businesses with evasive behavior will be a priority in the next period.” In this regard, he said that the almost 200,000 “tax control actions” resulted in debts of more than six billion pesos. For tax debts (in total, 1.202 billion pesos), he also reported that 9,248 people have been “regulated” – that is, prevented from leaving the country.
The prime minister anticipated that the country expects a deficit of 88.5 billion Cuban pesos (3.687 billion dollars, at the official exchange rate) for 2025, a figure similar to that of this year and the two previous years.
The head of the government had already indicated last week, at the plenary session of the central committee of the Cuban Communist Party (PCC), that the deficit for this year would finally be around 90 billion pesos, 57 billion less than initially forecast in the public accounts.
Independent economists such as Pedro Monreal and Pavel Vidal indicate that this deficit volume would be around 10% of the gross domestic product (GDP), which is one of the highest rates in the world .
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