Cuba will raise fuel prices and end the universal subsidy for the basic basket

He cuban government announced this Wednesday an economic shock plan for 2024 with increases in fuel prices, the electricity, he water and other services, as well as the end of the universal subsidy for the basic food basket.

The Cuban Prime Minister, Manuel Marrero, advanced this plan when speaking on the first day of the second ordinary session of the National Assembly (unicameral Parliament), during the debate on the economic situation.

Marrero argued, with respect to the basic basket, that the objective is to move to “subsidize people and not products” to achieve “a fairer and more efficient scheme” and tacitly recognizing the increase in social and economic inequalities in the socialist country.

“It is not fair that those who have a lot receive the same as those who have very little. Today we subsidize the same amount to an elderly pensioner as to the owner of large private businesses who has a lot of money.”argument.

Thus, he continued, the Ministry of Labor and Social Security must identify people by their degree of “vulnerability”, for “leave no one helpless” who will be able to continue purchasing highly subsidized basic products with the ration card.

Marrero stressed that this classification will be carried out in “the coming weeks and months”, without further details.

The need to make money

The head of the Cuban Government also assured that, given the situation, the State cannot continue with the “waste” in certain subsidies, such as water, electricity, liquefied gas, transportation and fuel.

Among these increases, the rise in 25% in the electricity rate 6% of the residential sector that consumes the most or the move to charge tourists for fuel in foreign currency. The cost of water supply will triple for those who do not have timed service and will increase by 25% the price of the liquefied gas cylinder.

Marrero also announced that “new rates will apply” to passenger transportation services, but without detailing how much.

The prime minister also announced that next year the Government will change the official exchange rate of the peso (cup) with respect to the dollar, for which a working group has been created with the Central Bank of Cuba.

Since 2021, the official exchange rate has remained at 24 cups per greenback for legal entities (companies) and at 120 cups for individuals. In the informal market, for its part, the dollar has skyrocketed to 273 cups.

The crisis that Cuba is going through

Cuba has been mired in a serious crisis for three years with shortages of basic products (food, fuel and medicine), rampant inflation, frequent blackouts and partial dollarization of the economy.

The Cuban Government now estimates that the gross domestic product (GDP) will contract in 2023 between 1% and a 2%after having predicted a growth of 3% at the beginning of the year.

Inflation in the formal market is estimated to close the year around 30% (that of the informal sector is much higher) and the deficit is going to rise to around fifteen% of the GDP, after the Executive recognized a deviation of the 44% with respect to what was budgeted.

For its part, the number of tourists who visited the island barely exceeded 2 million people, compared to the 3.5 estimated by the Cuban Government at the beginning of the year. By 2024, 3 million are expected, a figure still far from the between 4 and 5 million who traveled annually to the island before the pandemic.