Cuba and the Paris Club postpone payment of the 2021 debt until next year

Cuba reached an agreement with the Paris Club of creditor nations to postpone until next year the annual payment of the debt due in November, according to diplomats from five of the governments involved, in the latest sign that the communist country is suffering. a serious currency crisis.

The landmark 2015 Paris Club deal forgave $ 8.5 billion of the $ 11.1 billion of sovereign debt that Cuba defaulted in 1986, plus charges. Cuba agreed to reimburse the rest in annual installments until 2033, but only partially fulfilled its obligations in 2019 and defaulted last year.

The broad lines of an amended agreement, drawn up between the parties in June and not previously reported, call for the resumption of payments in 2022 and the adjustment of the payment schedule, diplomats said, requesting anonymity.

The Cuban government and the Paris Club did not comment on the issue.

In June, the parties said in a statement that “this agreement gives the Republic of Cuba more time to meet various payments owed under the 2015 Agreement, while maintaining the current value of these amounts.”

Cuba is now about $ 200 million behind in payments, including this year, diplomats estimated.

It is unclear whether sanctions will be applied, as the coronavirus pandemic crisis has prompted lenders to waive other debtor countries’ fees.

Cuba said this week that it had vaccinated 99.2% of its population with at least one of three doses of its locally developed COVID-19 vaccines. And it plans to reopen its borders to international tourism in mid-November after nearly two years of stagnation due to the coronavirus.

The Caribbean nation relies heavily on tourism to inject much-needed foreign currency into its state economy and also to obtain the cash it needs to repay lenders.

“I expect a fairly robust return of tourists that impacts other activities and that should improve payment prospects a bit in 2022″ Said one of the diplomats.

During the last decade, Cuba also restructured its debt with holders of commercial debt from Russia, China, Germany, Mexico and Japan.

“I understand that most of those payments are also on hold”Said another diplomat, and a colleague seconded that opinion.

Tough U.S. sanctions on vital sources of foreign exchange such as tourism, remittances and foreign investment, many of them implemented under the then government of former President Donald Trump, have been kept under his successor, Joe Biden, something that also complicates income.

Foreign exchange earnings fell by about $ 4 billion from 2020 and imports of basic goods and inputs for agriculture and production in general plummeted almost 40% as a result, the government reported.

The economy contracted 10.9% last year and another 2% through June, compared to the same period in 2020, resulting in shortages of food, medicine and other basic goods.

Under the original Paris Club agreement, as seen by Reuters, interest was forgiven until 2020, after which only 1.5% of total outstanding debt remains. Part of that money owed was assigned to funds for investments in Cuba.

Diplomats who spoke to Reuters said they did not expect any significant changes to that part of the agreement.

Cuba last reported an external debt of US $ 18.5 billion in 2018, and experts say it has risen since then, especially for suppliers and investment partners who reported serious payment problems as early as 2018. The country is not a member. the International Monetary Fund (IMF) or the World Bank.