Cubans Skeptical of Government Efforts to Boost Banking Amid Economic Crisis

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Amidst a severe economic crisis and surging inflation, the Cuban government’s attempt to compel citizens to deposit their money into the fragile banking system is facing skepticism. Cubans, accustomed to carrying cash due to long-standing issues with the banking sector, are reluctant to relinquish control over their money in favor of electronic payments. The country is grappling with a historic economic downturn, marked by double-digit inflation and extensive money printing, which has resulted in an increase in cash transactions.

The government’s recent move to impose restrictions on cash payments aims to encourage the use of electronic transactions for greater transparency and control. However, the measure limits cash transactions to 5,000 pesos (approximately $20 on the black market), a small amount that many view as insufficient to meet daily needs. Many Cubans prefer to keep cash on hand due to concerns about the banking system’s efficiency and accessibility issues. The limited access to ATMs and the inability of the banks to provide immediate cash withdrawals deter citizens from embracing the electronic payment shift.

Cuban economist Omar Everleny Perez asserts that, given the high inflation rates and the scarcity of higher denomination banknotes, promoting the use of banks is crucial. Yet, the outdated banking infrastructure in Cuba presents challenges. Limited internet connectivity and the absence of widespread smartphone usage for contactless payments hinder the adoption of electronic transactions. Central Bank president Joaquin Alonso acknowledged the scarcity of point-of-sale terminals for card payments due to the substantial investment required.

The economic crisis in Cuba stems from multiple factors, including decades of US sanctions, inefficiency, and dependence on imports. The Covid-19 pandemic compounded the country’s struggles, particularly affecting its tourism industry, a major foreign exchange source. Monetary reforms in 2021 devalued the peso and led to a rapid decrease in its value. With year-on-year inflation surpassing 45.8% in May, and experts suggesting triple-digit inflation, the economic turmoil has prompted citizens to queue for basic necessities and has driven some to seek refuge abroad.

As the government urges a transition to electronic payments, private businesses, which were only recently granted legal status, are also apprehensive. Small business owners fear that the switch will impact their ability to import goods amid scarcity and high inflation. The attempt to channel cash into the banking system faces skepticism due to the country’s complex economic circumstances and the persistent challenges posed by the outdated banking infrastructure.

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