#Cuba 2016: Economic Austerity Without Shock Therapy

Published by Alma

By María Julia Mayoral/Prensa Latina

Cuba concluded 2016 with a negative growth rate of 0,9 percent due to limitations in fuel supplies and financial tensions aggravated in the second half of the year, however austerity did not convey social expense cuts.

Despite the fall of the Gross Domestic Product (GDP), free social services were preserved, such as education and public health for all the population, evaluated the National Assembly of the People’s Power (Parliament) in its December meeting.

‘Our economy did not collapse nor the blackouts (electricity interruptions) of the most difficult moments of the Special Period return as no few malicious international news media predicted’, asserted president Raul Castro speaking at the meeting.

The Minister of Economy and Planning, Ricardo Cabrisas, said the financial problems are motivated by the non-compliance of exports income, the difficulty of several trading partners caused by low oil prices and contraction in the fuel imports.

Also, ‘the persistence and immobility of the economic, commercial and financial blockade measures by the United States, strengthened over the last years by numerous fines imposed on international Banks that make business transactions with our country’, indicated the also Vicepresident of the Council of Ministers.

Cuba continues being unable to make international operations in U.S. dollars, ‘preventing to carry out many and important transactions in perspective’, exemplified Raul Castro.

The meteorological event, hurricane Matthew added obstacles, leaving a ‘significant balance’ of destruction in housing, educational centers and health, warehouses, indujstries and hotel facilities, as well as health structures as well as severe damage to infrastructure in roads, power lines, hydraulic and telecoms, estimated the government.

Amid the unfavorable panorama, Cuba kept ‘strictly honoring the obligations contracted as a result of the reorganization of the external debt’, highlighted Raul Castro at the parliament session.

However, it was not possible to overcome the temporary situation in with the delay in current payments to suppliers and to honor those payments ‘were executed and still are doing a group of negotiations that will enable to alleviate the described panorama’, he referred.

The Head of State and Government, thanked once more the commercial partners for their understanding and confidence and reiterated the will of the government to ‘reestablish gradually the normality in this important sphere and set the basis to prevent it from repeating in the future’.

Facing the adversities, the Council of Ministers adopted in June, 2016, a group of measures to guarantee the main activities which assure the economy’s vitality, ‘minimizing the impact on the population, preserving the social services and rising gradually its quality’, recalled Cabrisas.

According to the Executive, in 2017 tensions will continue associated to the availability of hard currency, the income from exports and strong limitations in the supply of fuels.

However, in 2017 the Cuban economy will retake the upward trend and the GDP will grow moderately, in about two percent , said Raul Castro.

To achieve those targets three premises will have to be carried out: guarantee exports and their opportune collection, increase national production to substitute imports, reduce all dispensable expenses and use available resources rationally and efficiently.

Parliament also approved the plan of the economy for 2017, which targets the highest growth rates in the sectors of the sugar industry, hotels and restaurants, in proportions above 30 and eight percent, respectively. It also includes increases between two and five percent in transport, warehouses and communications sectors; power supply, gas and water, construction, agriculture, cattle raising and silviculture, trade, repair of personal ware, fishing and manufacturing, except the sugar industry.

Contrary to practices in other countries, economic austerity will not lead to reduce expenses in direct benefit of the population, ratified the law on the Budget passed by the deputies.

The health, social security and educational sectors will represent 51 percent of current expenditures in the budget to maintain similar levels to the 2016 estimate, exemplified the Minister of Finance and Prices, Lina Pedraza.

Allocations for Social Security will increase due to the rise in retirement pensions, which will be paid in part with the increase of social security tax.

The Budget will also provide for the subsidies to families of low income for construction or repair of their houses, and the work for recovery from the impact of hurricane Matthew, coming from the tax on sales of construction materials, she informed.

Pedraza also referred that the Budget approved by the Legislative shows a deficit around 11 billion 500 million pesos (one peso equal to one dollar at the official exchange rate), equivalent to 12 percent of the GDP at current prices.

That includes a deficit in the current account of seven billion 330 million pesos, associated to subsidies to exports and substitution of imports.

The deficit has an importabnt support in the increase of productions and investment s, besides assuring similar levels to the year that ended in the social sphere.

The Minister confirmed the country expects to cover the budget gap through the emission of Sovereign Bonds that the National banking system acquires together with other financial commitments to be executed in 2017, not exceeding two billion 740 million pesos.

Deputies also referred that ‘only in a socialist system it is possible to destine substantial resources to sustain a social inclusive policy, to consolidate the conquests achieved and advance in the conformation of the ‘Plan of National Economic and Social Development until 2030’.

The targets approved require ‘the increase of income, efficiency, savings and greater control’, concluded the report of parliamentary commissions.

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