Economic Development

Monetary order not the root cause of inflation and Cuba’s economic problems

It is not the monetary order that causes inflation and Cuba’s economic problems, said Economy and Planning Minister Alejandro Gil in a video on Twitter.

It is the continuation and hardening of U.S. sanctions AND global pandemic conditions. Let us not forget is Cuba has experienced and survived these sanctions for over 60 years. To consider the economy without taking into account these two facts is equivalent to playing ostrich and burying one’s head in the sand.

Like the rest of the world, inflation in Cuba is running at an all-time high. But, it is not only a Cuban problem. It’s a global issue. Pandemic conditions have sent inflation raging in Latin America, the United States, and elsewhere. Tourism has shut down, labour markets are unstable, manufacturing and production have operated under a start-up and lock-down schedule, and global supply chains have seized up. Food, energy, and housing prices have soared.

Inflation makes a comeback. Sources: Haver Analytics and IMF

From the video on Twitter, points to consider on the monetary order and inflation.

  • It is not true that the cause of inflation in Cuba is the erroneous design and inadequate timing of the implementation of the monetary order by the Cuban government.
  • All of this would be present with or without monetary order.
  • Without monetary order we would have shortages, loss of the purchasing power of wages, price increases caused by the production deficit, all these phenomena are the basis of inflation.
  • This does not exclude that the monetary order, and this is recognized by the Cuban authorities, has design problems and problems in its implementation, a logical and expected process in such complex and radical processes.
  • These problems have been corrected in direct contact with producers, population and enterprises.
  • But it is necessary to see the positive aspects of the monetary order. First, it has allowed the country to make many things transparent in the real economy, it has allowed to expand the economic actors, it has already put the country in better conditions to take advantage now of the gradual recovery process.
  • The main phenomena that are now present in our economy would be present in the country without monetary order.

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