Cuba has the largest fiscal deficit in the world not counting Ukraine.

Cuba has the largest fiscal deficit in the world excluding Ukraine, according to a comparison with the latest report from the International Monetary Fund (IMF).

The regime itself stated this week before the National Assembly of People’s Power that the island has an estimated deficit of 18.5% of its GDP for 2024, significantly above the rest of the countries and only behind Ukraine, which has 30.3%.

Cuban economist Pedro Monreal explains that this deficit is, by a wide margin, greater than all the current deficits in the world, with the exception of Ukraine’s, which could concern creditors and investors.

“Cuba’s deficit of 18.5% of GDP is more than double the international deficit of Algeria, the second largest after Ukraine. No other deficit reported by the IMF exceeded 8% of GDP. Other countries in conflict (Russia, Niger, Sudan, Yemen) did not exceed 6.2%,” he clarified.

The data was presented by the Minister of Finance, Vladimir Regueiro Ale, to the National Assembly on December 18th, where he said that for 2024 the fiscal deficit would have a maximum limit equivalent to 18.5% of the Gross Domestic Product, the second highest percentage since the fall in 1993 as a result of the special period.

1/2 The deficit equivalent to 18.5% of Cuba’s GDP in 2024 is, by a wide margin, larger than all current deficits in the world, with the exception of Ukraine’s. I suppose that in Cuba it is understood that this information is public and that creditors and investors will draw conclusions pic.twitter.com/ykewhW9Zgs — Pedro Monreal (@pmmonreal) December 21, 2023

Several deputies intervened to point out that such a high deficit would lead to more inflation and an even greater deterioration of the standard of living of the population. In this regard, they called for a review of other potential revenue sources and savings on expenses.

Monreal says that in this context, it is worrying “whether the risk of debt and investment increases or decreases in a country that, with double-digit inflation, adopts a fiscal policy with the second largest deficit and the usual practice of covering it with monetary liquidity.”

“Is it a rational economic decision?” he questions.

“That deficit indicates macroeconomic policy out of control,” emphasizes Monreal, for whom this situation could potentially cause disturbances of various kinds.

“The markets in CUP and in foreign currency do not function as isolated ‘quarters’, although the official economic superstition assumes that idea,” he explained.

Monreal also analyzes the regime’s 2024 budget proposal and says that it potentially renders all that has been said so far about macroeconomic stabilization in Cuba meaningless.

He indicates that with a deficit estimated at 18.5% of GDP there would be no macro stabilization; but the official media have tried to omit this “galactic deficit”; because “it indicates that reducing inflation is not a ministerial priority”.

Another economist, Josué Portal, considered that this situation might not deter investors, but it could enable the regime to resort to national resources to alleviate its debt. He explains that these national resources have been used to “pay debt without passing through money”.

2/3 Cubadebate published a note today with a lot of data about the 2024 budget, but it does not mention the most important figure that had been reported on December 18th in the committee work about an estimated deficit equivalent to 18.5% of the GDP pic.twitter.com/vc9DfXEj37 — Pedro Monreal (@pmmonreal) December 21, 2023

Amidst this bleak forecast, the Cuban regime announced a new package of measures with price hikes and taxes on basic services such as water, gas, transportation, and energy, among others.

While speaking at the Second Ordinary Period of Sessions of the National Assembly of People’s Power, during its X Legislature, the Cuban Prime Minister Manuel Marrero Cruz said that it is unsustainable for the country to continue subsidizing these services.

The ration card was also eliminated, which represented the only source of access to food with prices controlled by the vast majority of the island’s population.