HAVANA – Cuba says its budget deficit came in far below forecasts in the first half of 2010, evidence that tax increases and deep spending cuts on food imports may be helping the communist government weather a severe economic crunch.
Cuba reported on Thursday a deficit of nearly $410 million for the six-month period, less than a quarter of the $1.7 billion that central planners originally predicted.
CUBA’S FOREIGN DEBTAs of the end of 2008, Cuba’s total known foreign debts in convertible (hard) currencies had grown to nearly US$31.7 billion from a previous estimate of US$23.8 billion at the end of 2007. The depreciation of the U.S. dollar vis-à-vis the euro, Japanese yen, and Canadian dollar accounted in part for the substantial increase of the debt in recent years. More so, new borrowing by the Cuban government and state-owned enterprises has added billions of dollars to the country’s already large public debt, much of it in default, at a rate that seems unsustainable. Long-term financing, provided through a series of strategic cooperation accords with the Chávez administration, has enabled the island to import more than 90,000 bpd of Venezuelan petroleum and refined fuels at an estimated additional burden of US$3.4 billion to the island’s national debt in 2008 alone. Total Cuban obligations to Caracas now exceed US$11 billion.
Other political allies of Cuba, such as China, Iran, and Vietnam, have collectively extended more than US$2.5 billion in new bilateral commercial credit, backed by their respective governments, in recent years. European, Japanese, and Latin American lenders and suppliers also continue to offer US$2 to $3 billion annually in short to medium-term financing either directly to Cuban clients or to foreign businesses operating in, or trading with, Cuba. Regarding its non-convertible debt originating in the Soviet era, the Cuban government does not acknowledge demands by Moscow or other former trading partners in Central and Eastern Europe, claims amounting to over 20 billion transferable rubles. Havana has likewise refused to service its historic long-term debt, originally to Western European, Argentinean, and Japanese creditors and subsequently absorbed by their respective governments, ever since Fidel Castro declared a moratorium on foreign debt repayment in 1986 and called on other borrower nations to follow Cuba’s lead. Certain former socialist trading bloc nations, among them the Czech Republic and Romania, have converted their Soviet-era transferable ruble claims against Havana into convertible euro-denominated debt, suggesting that such creditor governments may seek compensation at a later date.
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