Caribbean nation to hike fuel prices by 500%
The Cuban government will hike gasoline and diesel prices on the island by 500% effective February 1, as part of a set of measures aimed at reducing the country’s large budget deficit.
Fuel in Cuba has been subsidized by the nation’s government for decades and is among the cheapest in the world.
The price of a liter of regular gasoline will jump from 25 Cuban pesos (CUP) ($0.20) to 132 CUP ($1.10), an increase of 528%, while premium gasoline will go from 30 CUP ($0.25) to 156 CUP ($1.30), up 520%, the minister of finance and prices, Vladimir Regueiro, announced on state television on Monday.
Late last month, Economy Minister Alejandro Gil admitted that, with the country short of foreign currency and under a punishing decades-long US embargo, the government could no longer afford subsidizing fuel.
The hike is also aimed at closing the gap in prices created by the subsidy. Energy Minister Vicente de la O Levy said previously that the fuel is currently priced based on the official fixed exchange rate of 24 CUP to the dollar, whereas arriving tourists exchange dollars at the current rate of 120 CUP to the greenback, which was introduced by the government in August 2022. That gives them an unfair advantage, the official explained.
Authorities said a network of service stations will be created for tourists, who will be obliged to pay for fuel in foreign currency.
The Cuban government, which subsidizes almost all essential goods and services in the country, announced a package of measures late last month aimed at addressing the economic crisis plaguing the country. Among the steps is an increase in the price of cigarettes, tobacco, and basic services such as liquefied gas, water, gas, transportation and energy.
According to official estimates, the island’s economy shrank by 2% in 2023, while inflation reached 30%.
The Cuban currency began a sharp decline in 2021 after the government dumped a complex dual-currency system. The government says the central bank is studying a potential new exchange rate against the US dollar.
Cuba has been under a US economic blockade since the early 1960s. Restrictions were eased during Barack Obama’s presidency, but later reimposed under Donald Trump. In October, Havana accused the US of provoking an economic crisis in Cuba. Washington’s sanctions have led to critical shortages of food, fuel, and medicine on the island, leading to mass emigration, according to the Cuban government.
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