Monday, December 26, 2005

Cuba hikes 2006 budget 32 percent

Cuba hikes 2006 budget 32 percent
By Marc Frank
7:34 a.m. December 25, 2005

HAVANA – The Cuban parliament late Friday approved a 33.3 billion peso budget for 2006, a huge 32 percent increase over this year's spending of 25.3 billion pesos and evidence that authorities are confident a 15-year crisis is over.
"Our public finances are in good health despite the genocidal imperialist blockade, hurricanes and drought and higher oil prices," Finance Minister Georgina Barreiro said on introducing the budget.
Barreiro said next year's budget deficit would be 3.4 percent of the gross domestic product, based on expected revenues of 31.5 billion pesos, a 35 percent increase over 2005, when the deficit came in at 4.2 percent of GDP.
Cuba officially pegs the peso as equivalent to 92 U.S. cents, but at domestic state exchanges it is currently valued at less than 5 cents.
The peso budget includes a hidden and often more important dollar budget, according to government sources.
The government reported an 11.8 percent increase in the GDP this year and forecast a 10 percent increase in 2006, based on a local formula yet to be accepted by any international organization.
The formula includes the estimated market value of free social services and subsidized goods and services to Cubans and massive medical and other services exported mainly to Venezuela.
Cuba's economy fell 35 percent when the Soviet Union collapsed, depriving it of massive subsidies and markets and resulting in shortages of food, energy, transportation and capital.
Since then, the import-dependent Caribbean island has moved away from sugar as its main export, with tourism, medical services, nickel, family remittances and pharmaceuticals now accounting for most of its foreign exchange earnings.
Cuba began bartering medical and other services for Venezuelan oil this year, and the South American country also began paying Cuba hundreds of million of dollars for additional medical and other services.
China is supplying the country with hundreds of millions of dollars of soft trade and development credits.
Communist Cuba's economy is more than 90 percent in state hands.
The government raised wages and pensions more than 25 percent this year, adding 4.2 billion pesos to spending, then absorbed the liquidity by buying Chinese appliances for dollars and selling them at cost for pesos using the domestic exchange rate, keeping inflation under 5 percent, according to the U.N. Economic Commission on Latin America and the Caribbean.
"With $400 million in appliances you can absorb 8 billion pesos," a Cuban economist pointed out.
Barreiro said increased spending was largely earmarked for defense, social services, wages and pensions, emergency reserves and a doubling of investments to 6.4 billion pesos.
Barreiro said increased revenues would come with economic growth, more efficiency, higher utility rates and the sale of more appliances and food to the population.

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