The Cuban Government has admitted that “design problems” with the Reforms Process and “problems” implementing it, have led to “deviations”, “mistakes” and “unwanted results”, as well as “multiple complaints among the population”.
HAVANA TIMES – The Reforms Process, the greatest economic reforms undertaken in Cuba in recent years, reaches its first anniversary amid a severe crisis, which these changes have only made worse, and doubts about what 2022, EFE news agency reports.
The wide-ranging series of reforms – which included the devaluation of the Cuban peso, the end of the dual-currency system, a general increase in state wages and pensions and subsidy cuts – was set in motion amid a harsh landscape: with the economy nose-diving because of the pandemic and stricter US sanctions.
The Government has itself admitted that “design problems” with the Reforms Process and “problems” implementing it, because of the national and global economic situation, have led to “deviations”, “mistakes” and “unwanted results”, as well as “multiple complaints among the population”.
This is what Cuban prime minister, Manuel Marrero, wrote in his accountability report, which was submitted to the National Assembly (Parliament). He admitted that “things needed fixing and new decisions had to be made”, because the Reforms haven’t “completely met” their objective.
For the ordinary Cuban, the implementation of these measures coincided with food and medicine shortages, long lines to buy basic essentials, often at the stores only selling in foreign currency (MLC), when the majority of Cubans only earn in pesos.
But above all, the year that just came to an end, saw high inflation rates that hadn’t been seen in decades. Official statistics talk about over 70% in the retail market, although some experts estimate that real inflation (including the illicit market) stands at approximately 500%.
Cuban economist Pavel Vidal, an associate professor at the Pontificia Javeriana University in Cali (Colombia), explained to EFE that the currency reform “has sped up inflation” and hasn’t resolved “key issues that remained pending” such as the Cuban peso’s exchange rate, dollarization and differences between official and informal exchange rates.
He believes that “the economic authorities have been pushing for partial dollarization using bank dollars (MLC), which is a counter-productive sign that shows that the Government doesn’t have a lot of faith in the Cuban peso and its own currency reform.”
According to Cuban economist, Pedro Monreal, the Reforms Process “went wrong”. According to one of his Tweets, the price of the basic food products increased 7.9 times, while average wages only went up 4.4 times. Summarizing, he said that this adjustment “hiked up living costs.”
The economy is a priority for the Cuban Government in 2022. The minister of Finances and Prices, Meisi Bolaños Weiss, said that “fixing the problem of high inflation is the economy’s main challenge.”
When presenting the Economic Plan for this year, the minister of Economy and Planning, Alejamdro Gil, stressed that other priorities are macro-economic stability and recovering the role of the Cuban peso as the heart of Cuba’s financial system.
Cuban economist Mauricio De Miranda, based in Madrid, advocates for “realistic” reforms, in an article he wrote for Columbia Law School (US).
He advocates getting rid of stores selling with USD prices, embracing flexible exchange rates, opening up the financial system to foreign commercial banks and liberalizing foreign trade, “necessary” measures which will only be the first step in moving towards sustainable growth.
However, Vidal sees reason for optimism. Recovering the tourism sector and three vaccines developed to fight COVID-19 “can boost economic growth and help to control inflation.”
Furthermore, the reform that allows private micro-, small and medium-sized enterprises (MSMEs) in more economic sectors, could contribute to improving the economic situation, he notes.
Nevertheless, Vidal points out that the main obstacle to controlling inflation is “high fiscal deficit”, which has mainly financed by issuing money. “This means making decisions about subsidies and support for public companies that are financially unviable.”