In response to a severe and escalating economic and humanitarian crisis, the Cuban government recently initiated a series of drastic economic reforms. These measures, aimed at alleviating widespread shortages of necessities, include slashing subsidies, augmenting taxes and tariffs, and overhauling the island’s subsidy systems. As the new year dawned, the government imposed significant tax hikes on private enterprises, marked increases in gasoline prices, and introduced new tariffs on select imports, such as cigarettes.
During a critical session of the National Assembly in late December, Prime Minister Marrero unveiled a set of austere measures as part of a comprehensive “Macro-economic Stabilization Plan.” These steps include raising transportation and energy costs, hiking water usage rates in specific sectors, and instituting a requirement for foreigners to purchase gasoline in foreign currency.
A pivotal alteration involves transforming the ration card system, the Libreta, a historic emblem of the Cuban revolution. Traditionally, this system provided minimal subsidies for essential items like rice, milk, sugar, eggs, and others, subject to availability in state stores. Marrero announced that the Libreta would be restructured to target the nation’s vulnerable segments more effectively, scaling back its universal application. This move is intended to foster a more equitable and efficient approach to food security, addressing the increasing socio-economic disparities within Cuba. Marrero highlighted the inequity of the existing system, where wealthy business owners receive the same subsidies as impoverished elderly pensioners.
Cuba’s economic landscape is enduring its most severe crisis since the “special period” that followed the Soviet Union’s collapse in the early 1990s. The state-controlled economy’s Gross Domestic Product (GDP) shrank by 1 to 2 percent in 2023, with a fiscal deficit nearing 19 percent. This dire economic state has severely limited Cuba’s capacity to import essential goods. Official reports indicate an inflation rate of around 30 percent. Reuters recently described the Cuban economy as teetering on the brink of collapse, plagued by fuel, food, and medicine shortages, an absence of public transport, and escalating social tensions. This situation is exacerbated by U.S. sanctions, a downturn in tourism, and the prolonged impact of the pandemic.
In the past two years, an estimated 500,000 Cubans, about 4 percent of the population, have emigrated to the United States, reflecting the growing despair among the populace.
Implementing these new economic policies coincides with the 65th anniversary of the Cuban revolution. In a televised address on January 1, 92-year-old Raúl Castro called for national unity to tackle the economic challenges. He emphasized the urgent need for all Cuban revolutionaries to devise solutions to these pressing issues, underscoring the critical nature of the current economic battle.
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