Cuban ministers announce new economic measures for 2024

In a situation of shortages, shortages, social dissatisfaction and no prospects for immediate improvement, Cuba’s Council of Ministers announced new measures to “correct distortions and revive the economy in 2024.” This was revealed at their latest meeting, which, according to state media, assesses the country’s situation on a monthly basis, focusing on the economy.

Miguel Diaz-Canel BermudezThe ruling figure present at the meeting stressed the need for “conscious work, commitment and great control” in relation to these measures and those already implemented by the Cuban government, as reported by official media Grandmother.

The new measures, vaguely explained in the meeting report, are intended to “adapt the 2024 Plan and Budget to the conditions of a ‘war economy’”, a concept rooted more in faith and the power attributed to the state than in a specific stage, the economist noted. Pedro Monreal.

Although the term “war economy” may not be striking, it implies prioritizing resources and efforts in areas of high importance and impact, which can increase the efficiency of the use of limited resources. However, this can result in reduced investment in non-priority sectors, which will affect their medium and long-term development.

Government budget cuts

The government also proposes to “reduce budget allocations to reduce the fiscal deficit for 2024, based on unfulfilled budget items; specify requirements in budgeted activities to use the approved budget and centralize the authorization authority.” This could impose constraints on local authorities, potentially slowing down decision-making and reducing the flexibility of local entities to respond to specific and emerging needs.

In addition, they intend to “allocate financial resources on a monthly basis based on actual revenues for that month,” which could create uncertainty and cash flow issues for projects and services that rely on regular and predictable allocation.

Another decision is to “calculate the fiscal impact of non-state sector imports; grant tariff benefits, including exemptions, for the import of raw materials and inputs for production, and supplement the tax system for e-commerce.” They also plan to establish “a uniform, inclusive pricing policy on equal terms for all economic entities, including both state and non-state sectors.” If not adjusted appropriately, this measure could exacerbate the current supply and demand problem, increasing product shortages.

Further regulations will “limit profits from purchases of products and payments for services and inputs made by the state sector to the non-state sector; encourage production linkages without sacrificing production capacity; initiate the process of developing the 2025 Economic Plan and State Budget based on the approval of the Global Model and Government Directives developed for this process; and accelerate the implementation of a plan to resolve existing banking problems,” it was announced.

One risk of these measures is that they could discourage the non-state sector from engaging in transactions with the state sector if they are deemed unprofitable. This poses a challenge to the Cuban government, which has repeatedly demonstrated the ineffectiveness of its policies.

Implementation challenges need to be approached carefully to avoid negative impacts on the population and key economic sectors.

According to Deputy Minister of Economy and Planning, Mildrey Granadillo de la Torrethese measures are “integral in nature and result from the complex existing economic situation.” She assured that the actions focus on “the development of the country’s macroeconomic stabilization, a complex process that requires coordination and adjustment between global economic entities,” aimed at “improving planning mechanisms, relations between economic entities, attracting financing, eliminating tax evasion and increasing production.”

Economist Pedro Monreal is skeptical about these measures. In a recent thread on X, he criticized a press report from Grandmother and pointed out that “there is a kind of economic schizophrenia when talking about “centralization” of budget approval, “uniform” pricing policy and more regulations, despite acknowledging the problems of bureaucracy and “inefficient” institutional control.”

Monreal described the Council of Ministers as “a governing body mired in worn-out rhetoric, unclear communication of results and actions, and an economic team that is clearly disoriented by the country’s macroeconomic destabilization.”