The key to Cuba’s largest economic adjustment in decades that will be implemented this year

Many people closed a street in Old Havana in protest after days without drinking water in their homes (EFE/Felipe Borrego)

Cuba will implement it in 2024 major adjustment plans Over the decades macroeconomic, growth in services such as energy, water and gas, fuel increases and the end of universal food subsidies.

The government has highlighted its urgency – and stressed that it will not affect the poorest sectors – to confront the severe economic crisis, with shortages of basic goods expected to hit GDP by between 1% and 2% in 2023. decline and fiscal deficit close to 19 percent.

However, the package is criticism erupted Independent economists and dissidents have pointed out that this will further increase the economic inequalities already visible in the socialist country, and that, far from being adjustments, these are cosmetic changes to reforms that have not fallen on their feet.

Drivers wait their turn to refuel at a gas station in Havana (EFE/Yander Zamora)

After the surprise announcement of the so-called macroeconomic stabilization plan in the National Assembly (unicameral parliament) in late December, Prime Minister Manuel Marrero assured that given the situation Cuba’s “war economy”, the state cannot continue to “waste” in some subsidies.

An example of this is electrical energy, which will see a 25% increase this year compared to 6% for most spenders.

there will be another change Charging fuel in foreign currency for tourists and price adjustments for the rest of the population. As the government had anticipated, this would not apply to transporters.

On the other hand, the cost of water supply will triple for those who do not have timely service and the price of liquefied gas cylinder will increase by 25%.

A street in the center of Havana (Reuters/Alexandre Meneghini)

One of the most notable points in the government package is End of universal subsidy of subsidized products Through the ration card, which will celebrate the 60th anniversary of its creation in 2022.

Its purpose is the same as the other measures. The state, amid its liquidity crisis, will try to prioritize subsidies for those it considers “vulnerable”.

The government clarified that the above does not mean that the passbook has ended, but it will move to a system in which prices will change depending on the income of each person.

In an intervention on state television, the Economy Minister, Alejandro Gil, asked to what extent it was possible to “maintain” the same level of subsidies on all products. “Population, when not everyone is in the same state of economic solvency”Quietly recognizing the social differences on the island.

It costs about Cuba 1.6 billion dollars – At a time when it lacks foreign currency to access international markets, added to the difficulties of US economic sanctions – Maintain the ration card scheme, as the Caribbean country imports 80% of the food it consumes.

Miguel Diaz-Canel (EFAndrej Cukic)

Cuba will also change its official exchange rate in relation to the dollar., which in the case of legal entities remains at 24 Cuban pesos (CUP) per greenback since the implementation of the 2021 monetary reform, which abolished the convertible peso (CUC), a currency whose value was equal to one dollar. . For individuals, the rate is 120 pesos for each US currency.

Since the implementation of the so-called ordering function, three years ago, and according to independent economists, the black currency market on the island has been strengthened, with the rate hovering around 265 CUP per dollar. this Monday.

The government itself has accepted this The reform has not met its objectives.

“Among the measures proposed is to fix the management of foreign exchange by the state, because part of what is happening with us today is that the state is under-supplied and there is over-supplied from the private sector, because the private sector, in some way , is obtaining these currencies in the informal market, the illegal market, and those currencies are not entering the national financial system,” the Economy Minister condemned.

Cuban flags are seen on a commercial street in the center of Havana (Reuters/Alexandre Meneghini)

The government, led by its president Miguel Diaz-Canel, has come forward since the plan was announced to state that it is not a plan. “Neoliberal package” or “wonder plan.”

The executive has repeatedly reiterated this idea in recent days, thus responding to some accusations from dissidents who have compared it to measures taken by other governments in the region – mostly right-wing – in recent decades.

The ruling party has said that what is sought is “rectification of a set of distortions”. in the insular economy and the aim is for the state to take the reins of these reforms.

In this regard, important Cuban economists such as Pedro Monreal have stated that “an economic package does not have to be neoliberal in nature to produce the same effects as a traditional neoliberal package.”

(with information from EFE)

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