Cuban Peso Plunge Spurs Tensions Amid Dollarization Shift

The Cuban peso hit a record low against the dollar, increasing inflation, inequality, and social tensions. The government blames U.S. sanctions, while critics argue slow economic reforms are at fault. Partial dollarization is underway, benefiting those with access to foreign currency and deepening societal divides.

The Cuban peso sank to a historic low of 400 to the dollar on the informal market, intensifying inflation and social struggles driven by partial dollarization in the state-led economy. This economic shift is exacerbating inequality in Cuba as goods become scarce and public infrastructure degrades.

Government officials attribute the crisis to U.S. sanctions that hinder foreign exchange revenues, resulting in an 11% economic contraction since 2019. Critics, however, point to the sluggish pace of economic reforms. To harness circulating dollars, Prime Minister Manuel Marrero detailed that partial dollarization allows the country to stabilize economically.

The peso's 25% depreciation this year coincides with the opening of dollar-centric retail outlets and increased dollar use in tourism and trade sectors. Despite government efforts, nearly 40% of Cubans without remittance access face deepening poverty as new economic measures heighten the divide between haves and have-nots.

(With inputs from agencies.)