The move is a major shift for the island nation's Communist government, and overturns a 1960s Fidel Castro policy of nationalising retail.

But Cuba is now facing its most severe economic crisis in decades, with rising prices and public discontent.

The policy aims to tackle shortages of basic goods, like food and medicine - but stops short of fully opening trade.

Government officials said that foreign investors would be able to wholly or partially own Cuba-based wholesalers.

But retail will not be open to international investors without scrutiny, as "a state market has to prevail" foreign trade minister Betsy Díaz Velázquez said.

Economy minister Alejandro Gil said the move will allow for the "expansion and diversification of supply to the population and contribute to the recovery of domestic industry".

In 1969, Fidel Castro nationalised Cuba's private wholesale and retail industry. The new foreign investment bill, however, recognises that the country's centralised government cannot resolve its essential goods shortage without investment from overseas.

Under the new policy, businesses that have been based in Cuba for several years will be prioritised. Government officials said they will prioritise deals with businesses selling green energy technologies and equipment that could boost domestic production.

It added that there will be no market competition at first.

The BBC's Central America and Cuba correspondent Will Grant says the move is something hardliner revolutionaries have opposed for years and its success is by no means guaranteed.

And Cuba's tightly state-controlled environment does not make it an attractive option for many investors, he adds.

Some stores in the country have had to introduce rationing, to ensure consumers are able to have access to essential items, like cooking oil.

Thousands of people have voiced their anger over high prices and shortages of food and medicine in protests across the country. However, unauthorised public gatherings are illegal in Cuba and many were arrested as a result.

The coronavirus pandemic, lower subsidies from Venezuela and former US President Donald Trump's tight restrictions and sanctions on the island have all contributed to its economic problems.

In May, the US agreed to ease Trump-era sanctions on Cuba. Under the new measures approved by the Biden administration, restrictions on travel and how much money US residents could send back to their families in Cuba family were relaxed.

At the time, Cuba's foreign minister welcomed the announcement, saying it marked "a small step in the right direction".