Cash crisis in Cuba: Long queues outside banks amid severe peso shortage

An increasing number of people in Cuba are grappling with a severeshortage of cashfor routine transactions such as buying food and other essentials.Areport by thenews agency Associated Press early Sunday (Apr 28)said that long lines were seen outside banks and ATMs in the capital city of Havana.Experts have said that there are several reasons behind the cash shortageandallsomehow arerelated to thecountry'seconomic crisis,which isone of the worst in decades.

Twenty-three-year-oldAlejandro Fonseca stood in line for several hours outside a bank in Havanahopingto withdraw money from an ATM. But when it was almost his turn, the cash ran out.

Add WION as a Preferred Source

Fonseca then travelled several kilometres to anotherbranchwherehe finally managed to withdraw some money after wasting the entire morning."Itshouldn’tbe so difficult to get the money you earn by working,"he told the Associated Press.

What are the reasons behind cash shortage?

According to Cuban economist OmarEverleny Perez, the main reasons behind the shortage arethegovernment’sgrowing fiscal deficit, the nonexistence of banknotes with a denomination greater than 1,000 Cuban pesos (about $3 in the parallel market), stubbornly high inflation, and the non-return of cash to banks.

“There is money, yes, but not in the banks,”Perez told the news agency. The economist pointed out that most of the cashis being held not by salariedworkers,but by entrepreneurs and owners of small- and medium-sized businesses who are more likely to collect cash from commercial transactions but are reluctant to return the money to the banks.

Hoarding up of pesos

A majority ofentrepreneurs and small business owners in Cubahave to import almost everything they sell or pay in foreign currency for the supplies needed to run their businesses.

As a consequence,many end up hoarding Cuban pesos to later change into foreign currency on the informal market.Converting those Cuban pesos to other currencies poses yet another challenge, as there areseveral,highly fluctuating exchange rates on the island, the report further said.

Also watch |Cuba: US trade embargo, sanctions trigger food & medicine shortage

Currently,the official rate used by government industries and agencies is 24 pesos to the USdollar, while for individuals, the rate is 120 pesos to the dollar. However, the dollar can fetch up to 350 pesos on the informal market.

Perez said that in 2018,50 per centof the cash in circulation was in the hands of the Cuban population and the other half in banks. But in 2022, the latest year for which information is available, 70 per centof cash was inthe wallets of individuals.

(With inputs from agencies)