Havana - Cuba’s cash-strapped government announced on Monday that fuel prices will soar up by more than 500% beginning 1 February, part of a series of economic measures aimed at reducing the deficit.

The cost of a litre of regular petrol will rise from 25 pesos (20 US cents) to 132 pesos, while the price of premium petrol will jump from 30 to 156 pesos, Minister of Finance and Prices Vladimir Regueiro said on state television.

Authorities also said tourists to the struggling island nation will pay for fuel in foreign currency.

Cuba’s government, which subsidizes almost all essential goods and services, announced a series of measures in late December aimed at cutting the deficit at a time of severe economic crisis across the country.

According to official estimates, the Cuban economy shrank by 2% in 2023, while inflation has reached 30%.

Late last month Economy Minister Alejandro Gil acknowledged that the government could no longer sell fuel at “subsidized” prices, with the Communist-led country short of foreign currency and still under a punishing decades-long US embargo.

“The country cannot maintain the price of fuel, which is the cheapest in the world compared to prices in other countries,” Gil said.

Cuban petrol is “very cheap, but if you compare it with salaries in the country, petrol is very expensive,” economic expert Omar Everleny Perez told AFP, adding that the new price structure will affect “the whole of society.”

The government on Monday also announced a 25% increase in electricity prices for major consumers in residential areas, as well has hikes in costs for natural gas.

It also said the central bank was studying a potential new exchange rate against the US dollar. The peso has been devalued twice since 2021.

The island of 11 million people is experiencing its worst economic crisis since the collapse of the Soviet bloc in the 1990s, due to consequences of the pandemic, tightening of US sanctions in recent years, and structural weakness.

- Nampa/AFP