Cuba suspends cash deposits in dollars citing embargo challenges

·2 min read

Cuba will temporarily stop accepting cash deposits in dollars at its banks starting on June 21, saying the U.S. sanctions make it difficult for the island to use greenbacks abroad, the Central Bank said late Thursday.

Bank transfers will still be accepted, and account holders will be able to withdraw funds from their dollar accounts, the bank said. Deposits in other currencies such as the euro, Japanese yen, Canadian dollars and British pounds, among others, will also be accepted, the statement said.

“In view of the obstacles that the U.S. embargo creates for the national bank system to deposit abroad the U.S. dollars that are collected in the country, a decision was made to temporarily suspend deposits in U.S. banknotes in Cuba’s bank and financial system,” according to the statement, read by the host of a round-table discussion on state TV.

Cuban and foreign bank account holders on the island will have until June 21 to deposit dollars in their accounts. The bank didn’t indicate how long the suspension would last.

This comes as the U.S. dollar in Cuba’s black market has soared in recent months to about 70 Cuban pesos, about triple the official exchange rate of 24 pesos. The Cuban peso weakened significantly against the dollar after the island eliminated a confusing dual-currency system that maintained one currency valued at parity to the dollar and another much weaker currency.

That created distortions in the economy and kept workers in state companies — the largest portion of the population — earning much less than those in cooperatives or private enterprises.

Recently, a severe drop in remittances due to restrictions imposed during the Trump administration and the slump in tourism because of the COVID-19 pandemic has made the U.S. dollar even more scarce in the local economy. But Cubans on the island need dollars to shop for basic items at so-called dollar stores, as shortages of food and medicine have become widespread in regular stores. The dollar stores opened in 2019 as a way for the government to obtain hard currency from people who receive the U.S. currency from family members who live abroad.

Central Bank Vice President Yamile Berra Cires said that suspending cash deposits was a necessary move to protect the local financial system. She said that 24 banks have stopped doing business with Cuba since former President Donald Trump tightened U.S. sanctions on the island.