For decades, Cuban communist government has provided subsidies for fuel, making it one of the most affordable options globally.
But effective February 1, 2024, the government of Cuba will increase the prices of gasoline and diesel on the island by 500% as part of a series of measures intended to address the country’s significant budget deficit.
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According to this week’s televised statement of Cuba’s Minister of Finance and Prices, Vladimir Regueiro, the cost of one liter of regular gasoline will rise by 528%, going from 25 Cuban pesos (CUP) ($0.20) to 132 CUP ($1.10). Similarly, premium gasoline will experience a 520% increase, going from 30 CUP ($0.25) to 156 CUP ($1.30).
Energy Minister Vicente de la O Levy emphasized that the purpose of the hike is to rectify the price disparity resulting from the subsidy. Currently, the fuel is priced using the official fixed exchange rate of 24 CUP per dollar, while arriving tourists exchange dollars at the government-introduced rate of 120 CUP per dollar, granting them an unjust advantage.
Last December, Cuba’s Economy Minister Alejandro Gil acknowledged that due to a scarcity of foreign currency and a lengthy US economic embargo, the government could no longer sustain the financial assistance provided to fuel.
Last month, the Cuban government unveiled a set of measures to tackle the ongoing economic crisis in the country. These steps include raising the prices of cigarettes, tobacco, and essential services like liquefied gas, water, gas, transportation, and energy.
Cuban tourism authorities also announced that a network of service stations will be created for foreign tourists, who will be required to pay for gasoline and diesel in foreign currency only.
In 2023, Cuba’s national economy contracted by 2% as per official estimates, with inflation soaring to 30%.
Since 2021, the Cuban currency experienced a significant drop following the government’s decision to abandon a complicated dual-currency system. The government has stated that the central bank is currently examining the possibility of establishing a new exchange rate with the US greenback.
Since the early 1960s, Cuban communist regime has been under strict economic sanctions imposed by the US . While there were some relaxations during Barack Obama’s presidency, the restrictions were reinstated during Donald Trump’s administration.
In October, Havana accused the US of deliberately causing an economic crisis in Cuba. Cuban communist government claimed that the island has experienced severe scarcity of food, fuel, and medicine, leading to a significant increase in emigration, as a result of Washington’s sanctions.