Higher taxes, lower food bill narrow Cuban deficit

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 US$410 million for the six-month period, less than a quarter of the US$1.7 billion that central planners originally predicted.

Lina Pedraza, minister of finances and prices, said Cuba generated a bit more than US$21.2 billion. Over the same period, it spent US$21.6 billion - creating the smaller-than-expected shortfall.

The figures were made public in the Communist-party newspaper Granma. They were approved by the nation's Economic Affairs Commission, a slate of lawmakers that huddled prior to a full session of parliament Sunday.

Cuba has slashed imports to deal with its economic problems, particularly in the areas of food and agriculture.

Government control

But Pedraza attributed the lower deficit to higher taxes and improved collection methods, as well as a new law that pushed back the retirement age from state jobs, while upping the amount government employees contribute to, and receive from, state pension funds.

The government controls well over 90 per cent of the economy and pays employees about US$20 per month, but also provides free education through college and health care. Subsidies also are provided for housing, transportation and some food through monthly ration books.

The outlook remained unexpectedly rosy, according to Pedraza, despite a roughly US$198 million deficit created by ordinary Cubans, who have fallen behind on payment plans to reimburse the state for refrigerators, air-conditioning units and other appliances authorities have distributed in homes.

The government provided them as part of an effort to save energy and relieve strain on the island's creaking electric grid, but requires that Cubans pay back the costs of the appliances over time. But many consumers have been unable to keep up with their payments, pushing state budgets further into the red.

Sales also were weak for Cuba's world-famous cigars and the domestic consumption of industrial goods, beer and eggs.

President Raul Castro, 79, said Sunday that his government will scale back controls on small businesses, lay off unnecessary workers and allow more self-employment - significant steps in a country where the state dominates nearly every facet of the economy.

Castro, however, squashed notions of a sweeping overhaul to the country's communist economic system in response to the financial crisis it faces.

About 95 per cent of all Cubans currently work for the government, and Castro has suggested that as many as one in five state employees are redundant. He promised job cuts, calling for "the reduction of work forces that are considerably bloated in the state sector."

His brother Fidel, who turns 84 on August 13, has made a spate of recent public appearances, but has refrained from talking about Cuban current events.

The gray-bearded Fidel gave up Cuba's presidency, first temporarily, then permanently, after a health crisis in July 2006. He remains head of the island's Communist Party and is a parliament deputy, however, though he has not attended a session since December 2005.

- AP