Havana, Jan 2 (IANS): Cuba has introduced a monetary overhaul which will eliminate the dual currency system in place on the island nation since 1994, in hopes of improving the country's economic performance amid the Covid-19 pandemic and the tightening of US sanctions.

The reform, which came into effect on Friday, will also increase salaries, pensions and social security payments, while transforming the pricing structure completely, reports Xinhua news agency.

The country's planned economy has been operating with the Cuban peso (CUP) and the Convertible peso (CUC), pegged to the US dollar at par and worth 24 times as much as the CUP.

However, the CUC has had different exchange rates for the public, joint ventures and state-owned enterprises over the past three decades, which has created distortions in the economic system, according to the island's authorities.

With the new measures in place, $1 will equal 24 CUP, and the CUC will be out of circulation by the end of June.

Nationwide, automatic teller machines are no longer dispensing CUC notes as grocery stores, shopping centres and state-operated businesses are giving changes only in Cuban pesos.

Cuba's Central Bank will update the daily exchange rates of Cuban pesos with foreign currencies.

The Caribbean nation increased the national average salaries, pensions and social security payments fivefold, which will improve the purchasing power of millions of people across the country.

The reforms come as Cuba expects a gradual recovery of the economic activity during 2021 after the country's gross domestic product (GDP) decreased by 11 per cent last year.

The island has already eliminated a 10 per cent tax on dollars to absorb more hard currency, which allowed citizens to use dollars to buy food, hygiene products, electronics and other goods via bank cards from stores.

Also, the Caribbean nation launched a "single window" system for foreign trade and investment to expedite export and import processes while attracting overseas investors to the island.