The government adapts its plans to the “war economy” and announces a “uniform” pricing policy

The Cuban government has announced adjustments to the economic plan and state budget for 2024 to the conditions of a “war economy” as well as a “single” price list a policy that is part of a new set of measures aimed at tackling the crisis the country is going through.

This came at the latest meeting of the Council of Ministers, where the island’s authorities admitted that the economy had fallen compared to previous estimates and presented the new package as part of the government’s will to “correct distortions and re-stimulate the economy”, According to to the newspaper Grandmother.

According to First Deputy Minister of Economy Mildrey Granadillo de la Torre, these measures aim “in essence to correct macroeconomic imbalances; to increase the attractiveness of foreign currencies for the country through various means and concepts; to encourage domestic production, with particular attention to food production; and to organize the functioning of non-state forms of governance.”

The official confirmed that “among the main actions” is “adapting the 2024 Plan and Budget to the conditions of the ‘war economy,’” although the official gazette did not provide details on the scope of these adjustments.

Other announced actions include “reducing budget items to reduce the fiscal deficit in 2024 based on unexecuted actions; specifying requirements for budgeted activities to utilize the approved budget; and centralizing approval powers.”

In addition, “allocate monthly financial resources in accordance with the actual income of the month; calculate the fiscal impact of imports of non-state economic forms; provide customs concessions, including exemptions, for the import of raw materials and production materials, and establish a tax system for e-commerce.”

Cuba: War on the Economy

New pricing policy

In her speech before the Council of Ministers, Granadillo said that “a uniform, inclusive pricing policy will be established on equal terms for all economic actors, both state and non-state sectors.”

This Grandmother the report also does not disclose details about this new policy. However, publications in unofficial media are currently repeating the alleged price “ceiling” of various products sold by SMEs and other economic actors.

According to this unconfirmed information, the message was delivered by Deputy Finance Minister Lourdes Rodríguez at a meeting with non-state actors and the Ministry of Foreign Trade, and the products “covered by the limit” were chicken, oil, sausages, pasta, milk powder and detergent.

The measure would be “temporary” in nature, with price “caps” set based on import costs reported by private importers in the second half of 2023 and the first quarter of 2024.

However, the Cuban government has not yet issued an official report on the matter, and this alleged “ceiling” was not explicitly mentioned in the official report of the Council of Ministers meeting.

Among the new measures, the Council of Ministers confirmed the regulation “on limiting the profit from purchases of goods and payments for services and inputs made by the state sector to the non-state sector”, which was announced a few days ago and has been in force since this Monday.

In this context, economist Pedro Monreal considered to be that this measure, which sets a profit limit of 30%, “repeats the mistake of the Ministry of Finance and Prices in adopting an erroneous pricing methodology at the level of the economy (local and national), attempting to impose a “planned” profit that ignores the actual supply and demand relationships.”

“Progress in macroeconomic stabilization”

According to Grandmother The report also says the Cuban government plans to begin developing an Economic Plan and State Budget for 2025 “based on the approval of the Global Model and Government Directives developed for this process.”

Cuban authorities also intend to “proceed with the implementation of an action plan to resolve existing problems in the bankarization process”, which continues to generate much controversy in the media and on the Cuban streets.

According to Mildrey Granadillo, “these and other approved decisions” — which were not mentioned in the report — are “comprehensive in nature and are based on the complex situation that exists in the economy” and are aimed at “accelerating the macroeconomic stabilization of the country, a complex process that requires coordination and adjustment between global economic organizations.”

In this sense, she considered it necessary to “improve planning mechanisms, relations between economic entities, attract financing, eliminate tax evasion and increase production” as “necessary actions”.

Commenting on the matter, Prime Minister Manuel Marrero Cruz assessed that the new package is an “important step” that includes “measures linked to a higher stage” in the implementation of the forecasts and “affects sensitive issues for the population”.

Economy Minister Joaquín Alonso confirmed the economy would contract at the end of 2023 “compared to the previous year and estimates for the first half of 2024,” although the official report did not provide data on the contraction.

The minister stressed that the country’s economic situation “is still complicated” and, according to Grandmother“stressed the need to assess the causes of what is happening in the economy in order to be able to take action in the second half of the year.”

Cuba is in the midst of a severe economic crisis, marked by shortages of basic necessities such as food, fuel, and medicine, as well as rising inflation and ongoing power outages. This situation has been exacerbated by the pandemic and U.S. sanctions, as well as domestic inefficiency and the low effectiveness of government countermeasures.

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