HAVANA – Cuba announced tough economic measures for 2024, including increasing prices for fuel and basic services, cutting subsidies and restrictions on the emerging private sector, alarming ordinary Cubans.
The changes announced Wednesday, to be implemented in 2024, would be some of the most significant changes to the communist-ruled island's economy in years.
Prices for water, electricity, LPG, transport and fuel will rise in the coming year. Households that use the most electricity will see a 25% increase, and the price of water will triple for some households. Some of the changes, particularly in electricity, could have a significant impact on those running small businesses from home.
At a gas station in Havana, Cuba's capital, people expressed concern Thursday about what would happen if the price increases began.
Jorge Castro, a driver who works for the state, had already waited in line for two hours to fill his tank and was still halfway to the pump. “It's hard because they're going to raise gas prices, but we're still going to have long lines,” he said, referring to the gas shortage.
Alexis Velíz, a private sector worker, said: “It will affect a lot of people in Cuba because not everyone will have the money to pay for gas.” This will have a big impact because everything will become even more expensive. It’s a cycle that will make inflation worse.”
One of the notable changes is the move away from subsidizing staple foods and products – such as rice or sugar – and instead providing subsidies to people in need.
Shortly after the 1959 revolution, Cuba introduced the monthly ration book known as the “libreta” (notebook), providing all Cubans with heavily subsidized staples such as eggs, rice, coffee and sugar. Although the rationed food isn't enough to last a month, the subsidies are a lifeline for those who rely on a minimum monthly salary of about $17. Under the announced measures, only those considered vulnerable would be eligible for food subsidies.
Ricardo Torres, a Cuban economist and fellow at the American University in Washington, D.C., said the changes, if implemented, would mark a departure from the island's centrally planned economy.
He said late leader Fidel Castro's policy was: I am the owner of everything, but I also care for everyone.
“But will the government now allow Cubans to do anything to secure their income?” asked Torres. “The answer is no, because there are an enormous number of restrictions that hinder the growth of the private sector.”
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Torres said part of the goal is to bring the country's high inflation and budget deficit under control. Cuba offset its deficit by printing money, which in turn contributed to inflation.
Prime Minister Manuel Marrero presented the so-called macroeconomic stabilization plan to the National Assembly.
Marrero promised to continue to allow the creation of private companies. Cuba lifted a ban on small and medium-sized businesses, often called “mipymes” in Spanish, in 2021. But he warned that measures would be taken to further control, saying the government had initially made mistakes.
Government officials have in the past linked the private sector to inflation, something Torres disagrees with. He said mipymen cover a space that the state does not provide.
Omar Everleny, a Cuba-based economist, said the complexities facing the island cannot be resolved in a year.
“You cannot solve the macroeconomic distortions and imbalances in Cuba in 2024,” Everleny said. “It is obvious that Cuba is experiencing more than just an economic recession; It's an economic crisis. It's a problem with production, with supply. I don’t see a necessary holistic development plan with a focus on production.”
Economy Minister Alejandro Gil said this week that the economy may have shrunk by about 1% to 2% this year. In 2020, the year of the pandemic, it shrank by 11%.
“In 2023, Cuba’s real GDP will be similar to 2013,” Torres said. “It lost a decade of growth.”
Cubans have faced extreme shortages of food, medicine, fuel and electricity for several years. Inflation has risen sharply and is now at 30%. The economic situation has led to once unimaginable public expressions of discontent as well as the largest emigration in Cuba's history. Nearly 425,000 Cubans crossed the U.S.-Mexico border in the last two years, nearly 4% of the population.
The administration blames the GDP decline on tough economic sanctions initially imposed by former President Donald Trump and largely continued under President Joe Biden, as well as the coronavirus pandemic. The country relies heavily on imports for food and other goods.
Cuban President Miguel Diaz Canel posted on X, formerly Twitter, on Thursday: “We've said it before: Nothing, absolutely nothing, of what we do is for this.” [negatively] influence people. Our main task is economic recovery. The measures announced yesterday will give the economy the boost it needs. We will make more revolution and more socialism.”
Orlando Matos reported from Havana and Carmen Sesin from Miami.
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