In the midst of one of the biggest economic crises since the 1959 revolution, which has caused an unprecedented exodus of citizens abroad, the Cuban government announced a series of measures to try to reverse the situation.
The measures are intended to adjust the public budget “to the conditions of a war economy,” said the First Deputy Minister of Economy and Planning, Mildrey Granadillo, at a meeting of the Council of Ministers, the country’s highest executive body, according to a report by the official Granma newspaper on Monday.
The testimonies of Cubans who do not have access to medicines or basic products to survive, reveal the harsh conditions they must deal with daily, described by analysts as worse than those experienced during the 1990s during the so-called “Special Period.”
The situation has become so critical that at the end of February the government officially requested Aid to the United Nations World Food Programme to maintain the distribution of subsidized milk to children under 7 years of age.
“We are all here to save the revolution and to save socialism,” argued President Díaz-Canel at the meeting.
What are the measures?
In addition to a budget cut, which will involve suspending investments, the announcement includes measures such as Establish a single pricing policy and reduce tax evasionwith the aim of “correcting distortions”.
The idea, Granadillo explained, It is to address macroeconomic imbalances, increase the flow of foreign currency into the country and stimulate national food production, among other things.
One of the measures that has attracted the most attention, although the details are unknown, is price control, which theoretically would be applied “on equal terms for all subjects of the economy, including both the state and non-state sectors.”
If implemented, the announcement would affect private companies that were authorized to operate in the country after the ban on them carrying out commercial activities, which had existed since the beginning of the revolution, was lifted in 2021.
Unofficial sources say that the government has established contacts with the private sector to inform them of the application of price caps on basic products such as powdered milk, detergent, chicken and oil, although the complete list and the date on which price controls would come into effect are unknown.
As the country is in a “war economy,” the island’s Prime Minister, Manuel Marrero, said that in that situation “This is when we need to plan the most and when we need to exercise control the most.”
According to official estimates, the Cuban economy contracted by 2% in 2023, while inflation reached 30%.
The new package of measures follows a severe adjustment plan announced by the government in December, which included a 500% increase in fuel prices, a rise in electricity rates and an increase in the cost of liquefied natural gas.
The adjustment has made life even more expensive for Cubans, who in recent years have seen their purchasing power fall due to inflation, the devaluation of the Cuban peso against the dollar and the decline in tourism, the island’s main economic driver.
At the same time, the black market and family remittances continue to play a vital role in acquiring many basic products on the island.
The economic crisis, according to Cuban authorities, is due to the tightening of the US embargo in recent yearsthe effect of the Covid pandemic on tourism and the wave of inflation that has affected the world.
A sign of urgency
Pascal Fletcher
BBC Monitoring Analyst
The measures announced by the government this week were just the latest sign of official alarm and urgency in the face of the chronic economic problems facing the country and its leaders.
Once again, the emphasis was on the idea of exercising control. Nowhere was there any stated intention to launch significant liberalizing reforms in the Cuban state economy to create incentives for production, for example, in the important agricultural sector, which remains stagnant and unable to supply the population.
Cuba’s leaders argue that the foundation of the “war economy” is a necessary response to what they call “an act of war in peacetime” inflicted on the island by prolonged U.S. economic sanctions, long described by Havana as “the blockade.”
In recent months, Communist leaders have increasingly been using the term “war economy” to describe what experts say is the most catastrophic economic situation ever experienced by the island. sanctioned by the United States since the triumph of Fidel Castro’s Revolution in 1959.
For several years now, ordinary Cubans have been experiencing daily power outages that go from bad to worse – exacerbated in the hot summer months – combined with chronic shortages of food products, medicines and a host of basic consumer items, amid a scenario of widespread collapse of agriculture and industrial productionleaving the cash-strapped island heavily dependent on imports it can barely afford unless they are donated or subsidized by Havana’s political allies.
Real inflation, which has reached record levels, has left even the most basic food and necessities out of reach for many Cubans, unless they have access to dollars from relatives abroad, work in the nascent private sector, or have special privileges or access in the state hierarchy.
“War economy” or not, all signs point to Cubans facing another long, hot and difficult summer, including the ever-present possibility that Cuba, despite the authorities’ persistent crackdown on dissent and political opposition, could see a repeat of the government protests that swept across the island in July 2021.
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- How serious is the economic and energy crisis in Cuba (and how does it compare to the “special period”)?
- The harsh measures imposed by the Cuban government to combat the economic crisis and fuel shortage