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HAVANA — Alejandro Fonseca stood in line for several hours outside a bank in Havana hoping to withdraw Cuban pesos from an ATM, but when it was almost his turn, the cash ran out. He angrily hopped on his electric tricycle and traveled several kilometers to another branch, where he finally managed to withdraw some money after wasting the entire morning.

“It shouldn’t be so difficult to get the money you earn by working,” the 23-year-old told The Associated Press in a recent interview.

Fonseca is one of an increasing number of frustrated Cubans who must grapple with yet another hurdle while navigating the island’s already complicated monetary system — a shortage of cash.

Long queues outside banks and ATMs in the capital, Havana, and beyond start forming early in the day as people seek cash for routine transactions such as buying food and other essentials.

Experts say there are several reasons behind the shortage, all somehow related to Cuba’s deep economic crisis, one of the worst in decades.

Omar Everleny Perez, a Cuban economist and university professor, says the main culprits are the government’s growing fiscal deficit, the nonexistence of banknotes with a denomination greater than 1,000 pesos (about $3), stubbornly high inflation and the nonreturn of cash to banks.

“There is money, yes, but not in the banks,” said Perez, adding that most of the cash is being held not by salaried workers but by entrepreneurs and owners of small- and medium-size business who are more likely to collect cash from commercial transactions but are reluctant to return the money to the banks.

This, Perez says, is either because they don’t trust the local banks or simply because they need the pesos to convert into foreign currency.

Most entrepreneurs and small business owners in Cuba must import almost everything they sell or pay in foreign currency for the supplies needed to run their businesses. Consequently, 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 are several, highly fluctuating exchange rates on the island.

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

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

Cuban monetary authorities did not immediately respond to AP’s emailed request for comment.

The shortage of cash comes as Cubans grapple with a complex monetary system in which several currencies circulate, including a virtual currency, MLC, created in 2019.

Then, in 2023 the government announced several measures aimed at promoting a “cashless society,” making the use of credit cards mandatory to pay for some transactions — including purchases of food, fuel and other basic goods — but many businesses simply refuse to accept them.

Making things worse is stubbornly high inflation, meaning more and more physical bills are needed to buy products.

According to official figures, inflation stood at 77% in 2021, then dropped to 31% in 2023. But for the average Cuban, the official figures barely reflect the reality of their lives, since market inflation can reach up to three digits on the informal market. For example, a carton of eggs, which sold for 300 Cuban pesos in 2019, these days sells for about 3,100 pesos.

All while the monthly salary for Cuban state workers ranges between 5,000 and 7,000 Cuban pesos (between $14 and $20).

“To live in an economy that, in addition to having several currencies, has several exchange rates and a three-digit inflation is quite complicated,” said Pavel Vidal, a Cuba expert and professor at Colombia’s Javeriana University of Cali.
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WASHINGTON — The nation’s economy slowed sharply last quarter to a 1.6% annual pace in the face of high interest rates, but consumers — the main driver of economic growth — kept spending at a solid pace.

Thursday’s report from the Commerce Department said the gross domestic product — the economy’s total output of goods and services — decelerated in the January-March quarter from its brisk 3.4% growth rate in the final three months of 2023.

A surge in imports, which are subtracted from GDP, reduced first-quarter growth by nearly 1 percentage point. Growth was also held back by businesses reducing their inventories. Both those categories tend to fluctuate sharply from quarter to quarter.

By contrast, the core components of the economy still appear sturdy. Along with households, businesses helped drive the economy last quarter with a strong pace of investment.

The import and inventory numbers can be volatile, so “there is still a lot of positive underlying momentum,” said Paul Ashworth, chief North America economist at Capital Economics.

The economy, though, is still creating price pressures, a continuing source of concern for the Federal Reserve. A measure of inflation in Friday’s report accelerated to a 3.4% annual rate from January through March, up from 1.8% in the last three months of 2023 and the biggest increase in a year. Excluding volatile food and energy prices, so-called core inflation rose at a 3.7% rate, up from 2% in fourth-quarter 2023.

From January through March, consumer spending rose at a 2.5% annual rate, a solid pace though down from a rate of more than 3% in each of the previous two quarters. Americans’ spending on services — everything from movie tickets and restaurant meals to airline fares and doctors’ visits — rose 4%, the fastest such pace since mid-2021.

But they cut back spending on goods such as appliances and furniture. Spending on that category fell 0.1%, the first such drop since the summer of 2022.

The state of the U.S. economy has seized Americans’ attention as the election season has intensified. Although inflation has slowed sharply from a peak of 9.1% in 2022, prices remain well above their pre-pandemic levels.

Republican critics of President Joe Biden have sought to pin responsibility for high prices on Biden and use it as a cudgel to derail his re-election bid. And polls show that despite the healthy job market, a near-record-high stock market and the sharp pullback in inflation, many Americans blame Biden for high prices.

Last quarter’s GDP snapped a streak of six straight quarters of at least 2% annual growth. The 1.6% rate of expansion was also the slowest since the economy actually shrank in the first and second quarters of 2022.

The economy’s gradual slowdown reflects, in large part, the much higher borrowing rates for home and auto loans, credit cards and many business loans that have resulted from the 11 interest rate hikes the Fed imposed in its drive to tame inflation.

Even so, the United States has continued to outpace the rest of the world’s advanced economies. The International Monetary Fund has projected that the world’s largest economy will grow 2.7% for all of 2024, up from 2.5% last year and more than double the growth the IMF expects this year for Germany, France, Italy, Japan, the United Kingdom and Canada.

Businesses have been pouring money into factories, warehouses and other buildings, encouraged by federal incentives to manufacture computer chips and green technology in the United States. On the other hand, their spending on equipment has been weak. And as imports outpace exports, international trade is also thought to have been a drag on the economy’s first-quarter growth.

Kristalina Georgieva, the IMF’s managing director, cautioned last week that the “flipside″ of strong U.S. economic growth was that it was “taking longer than expected” for inflation to reach the Fed’s 2% target, although price pressures have sharply slowed from their mid-2022 peak.

Inflation flared up in the spring of 2021 as the economy rebounded with unexpected speed from the COVID-19 recession, causing severe supply shortages. Russia’s invasion of Ukraine in February 2022 made things significantly worse by inflating prices for the energy and grains the world depends on.

The Fed responded by aggressively raising its benchmark rate between March 2022 and July 2023. Despite widespread predictions of a recession, the economy has proved unexpectedly durable. Hiring so far this year is even stronger than it was in 2023. And unemployment has remained below 4% for 26 straight months, the longest such streak since the 1960s.

Inflation, the main source of Americans’ discontent about the economy, has slowed from 9.1% in June 2022 to 3.5%. But progress has stalled lately.

Though the Fed’s policymakers signaled last month that they expect to cut rates three times this year, they have lately signaled that they’re in no hurry to reduce rates in the face of continued inflationary pressure. Now, a majority of Wall Street traders don’t expect them to start until the Fed’s September meeting, according to the CME FedWatch tool.
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Paytm, a popular payment app in India, faces government restrictions on business because of its Chinese connections, local media say. India is ramping up scrutiny and restrictions on other Chinese tech companies, too, amid concerns about security and geopolitics. Henry Wilkins has the story from Mumbai.
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