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An Austerity Plan Won’t Fix Cuba’s Broken Economic Model

An Austerity Plan Won’t Fix Cuba’s Broken Economic Model
A woman walks past a man changing a tire on his classic American car, in Havana, Cuba, Nov. 24, 2023 (AP photo by Ismael Francisco).

Cuban President Miguel Diaz-Canel replaced the country’s economy minister on Friday, amid delays to planned price hikes for fuel and transportation. The government blamed the delays on a cyberattack that prevented the measures’ implementation, which had been scheduled to take effect Feb. 1. Although the fate of the measures is now uncertain, the economic crisis that made them necessary is exceedingly clear.

The Cuban government first announced the price hikes in December, as part of its most significant macroeconomic adjustment plan in recent decades. The measures were meant to slash government spending by replacing subsidies on goods that were previously provided at low fixed prices with direct financial assistance to vulnerable groups.

According to Prime Minister Manuel Marrero Cruz, the plan was necessary because the country’s “war economy” can no longer afford the waste represented by certain subsidies. Previously, Cubans received a libreta ration booklet to ensure equal distribution of essential food items and other goods at highly subsidized rates. The new plan was set to increase the prices of electricity, gas, water, public transportation and fuel, affecting most households.

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