Surprise! Cuba has the largest budget deficit on planet earth

From our Bureau of Great Moments in the History of Latrine American Socialism

Wow. Top of the list. Not exactly the kind of list any nation would want to be in, but you have to admit, this counts as some kind of achievement, creating the largest budget deficit in the world as a percentage of GDP. So, you see, Mildred, the Cuban Revolution has been very, very successful indeed. Top of the list. Bottom of the world.

Loosely translated from Diario de Cuba

With the world’s largest budget deficit forecast for 2024, the Cuban government is focusing on imposing “order and discipline” on micro, small, and medium enterprises (MSMEs) instead of addressing its own missteps.

Preliminary calculations indicate that Cuba’s budget deficit for 2024, measured as a percentage of GDP, will be the largest in the world at 15.4%. Economist Pedro Monreal highlighted this in a series of posts on X, warning that “even a moderate reduction would still maintain an extreme macroeconomic imbalance.”

According to the International Monetary Fund (IMF), Cuba’s figures surpass those reported for Ukraine (13.7%, despite the ongoing war with Russia), Egypt (10.9%), and Zimbabwe (9.9%).

“The updated deficit presented in the Cuban Parliament session, approximately 25 billion lower than the 2024 projection reported in December 2023, has reduced the percentage of GDP deficit from the initial estimate of 18.5%, but it remains colossal,” Monreal noted.

The dynamics of budget revenues and expenditures suggest the limited impact of tax increases as a percentage of GDP since expenditures have also risen, keeping the gap high, he explained.

“A greater GDP growth that doesn’t seem feasible is necessary,” he summarized.

The Ministry of Finance and Prices reported to the National Assembly that the 2023 budget execution was characterized by economic slowdown, financial imbalances, high inflation, and failure to meet planned revenues. This was attributed to the postponement of tax measures designed to increase fiscal revenues and the regime’s preferred scapegoat, the embargo.

In the plenary session of the National Assembly, Minister Vladimir Regueiro Ale blamed the runaway fiscal deficit on the government not collecting expected revenues from exported medical services, resulting in a shortfall of approximately 63.939 billion pesos, as reported by the official portal Cubadebate.

In another thread on X, Monreal argued that the “new phase of ‘order and discipline’ for MSMEs in Cuba raises several questions about the state policy towards national private enterprises that have yet to be publicly addressed.”

“If the new phase of ‘order and discipline’ genuinely aims to ‘improve’ policy towards MSMEs, the analysis should not only focus on ‘what did MSMEs do wrong?’ but also ‘what did the state do wrong to foster disorder and indiscipline?'” he pointed out.

“So far, beyond a passing self-critical reference (not being firm enough), there is a lack of a reasoned introspection that should include at least four questions, with the first being: What is essentially an MSME in Cuba? Two other relevant questions regarding MSMEs should be: how to better diversify the economy, and what type of company—by scale and level of development—has the most incentives in reforms and governmental transparency?” he proposed.

“For the economist, a fourth important question is: Where should large companies in Cuba come from? Only from the state sector, the mixed sector, and foreign investment?”

“The notion that MSMEs ‘complement’ the state enterprise, the ‘anchor’ of policy towards private enterprise in Cuba, is a worn-out notion (‘second economy’) that never worked well in the centralized planning reforms of the USSR and Eastern Europe,” he opined.

Following the implementation of price caps on products sold by MSMEs, the Cuban government has imposed fines totaling over 30 million pesos for violations of the measure. In the last five days, more than 19,300 price control actions have been conducted nationwide, with a violation detection rate of 60%, reported the official digital media Cubadebate, citing data from the most recent meeting of Prime Minister Manuel Marrero with governors from all the island’s provinces.

These actions, according to Vladimir Regueiro Ale, Minister of Finance and Prices, “significantly exceed the daily average of the first semester.” In addition to fines, authorities applied other pressure and control measures, such as forced sales, temporary withdrawal of business licenses, and confiscation from those operating illegally.

In the same National Assembly, attempting to explain the government’s abuses, now with price caps on essential goods that state-run stores in foreign currency sell more expensively, Prime Minister Manuel Marrero Cruz highlighted that the problem in Cuba is not the US embargo on the state sector, but the Castroist blockade on the private sector.