Cuba raises fuel prices by 500% amidst economic crisis

The Communist government of the Latin American country, Cuba has announced new measures to battle its recent economic crisis and cut its budget deficit, one such announcement is the decision to raise the cost of fuel in the country by almost 500% from the 1^st of February, 2024. The decision to raise the fuel prices by such a steep percentage is set to not sit well with the Cubans who have no idea as to how they are going to cope with this rise.

As per reports, the price of regular gasoline is set to rise from 25 pesos to 132 pesos and premium gasoline from 30 pesos to 156 pesos and this is not all. There are also reports of the government building 29 new petrol pumps in the country which will only accept US Dollars as the mode of payment, a way to replenish its stock of foreign currency for the purchase of fuel in the international markets.

“The country can not maintain the price of fuel, which is the cheapest in the world,” said Economy Minister Alejandro Gil. The government on Monday also confirmed a 25-percent rise in the price of electricity for major residential consumers, as well as an increase in the price of natural gas. According to the government, such tough measures are required to revive the Cuban economy.

However, the actual problem is that even though fuel prices and other costs are cheap, the average monthly income is hardly $40. This in turn makes the rise much more difficult for the Cubans than it appears for people living outside of Cuba, taking into consideration the fuel-to-income ratio of other countries and Cuba. Furthermore, a rise in basic necessities such as electricity and fuel will also trigger a rise in the prices of other commodities as transporting said commodities will also get costly. “It’s not the same to fill your tank with 1,000 pesos as it is to spend 6,000. The price of everything is going to go up; this will cause a chain reaction,” said state worker Ernesto Cordero.

The Cuban economy took a turn for the worse in 2020 due to the Covid pandemic. This is because Cuba which heavily depends on imports suffered shortages in food, medicine, consumer goods and many other sectors due to international restrictions. This in furtherance with structural weaknesses within the economy and the tightening of US sanctions made it much more difficult for the island nation. The peso also began a sharp decline in 2021 after the Cuban government announced a monetary reform that dumped a complex dual-currency system, giving birth to a new black market exchange that has contributed to soaring prices on the island.

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