Cuba ponders drastic currency reform to salvage economy

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The Independent Online
CUBA'S parliament is considering drastic measures to cut the country's bloated money supply and halt the plummeting value of its currency in an effort to prop up the economy.

The introduction of a new convertible currency and a freeze on savings accounts are among the proposals the Finance Minister, Jose Luis Rodriguez, put to a special two-day session of the National Assembly on Sunday. The peso is officially on a par with the US dollar, but on the black market dollars 1 fetches 100 pesos.

At the May Day session of parliament, held to tackle the economic crisis, President Fidel Castro said there could be no half- measures, as the country sought to reduce the 'cancer' of excess currency in circulation and return buying power to the people. He called for 'political courage' to take steps that would be tough, and which needed to be properly understood by the people. 'If we are going to take half-measures we might as well not do anything,' he said. 'We have to resolve the problem . . . We have to try to ensure that money is worth something.'

But the the President stressed that the reforms were designed to save the essence of socialism - free education and health care and egalitarian social policies. He said saving the peso was crucial to saving the value of workers' salaries.

Last year Cubans were allowed to hold dollars legally, and this stimulated the parallel 'dollar economy', which is largely outside the government's reach. It also dramatically devalued the peso. A convertible peso could enable the government to excercise some control over this unchecked sector.

Other radical proposals include levying an income tax 'as soon as conditions permit' and charging for some health services, which have been free - and a source of pride - under President Castro's government. Mr Rodriguez also said the state could net more revenue from increasing the prices of heavily subsidised basic products along with transport, telephone services, fuel, alcohol and tobacco.

Cuba's economy is still reeling from the loss of its former Soviet- bloc trading partners and continues to suffer the consequences of a tight United States embargo, instituted in 1962. Deputies agreed that drastic measures were needed, but warned against the shock therapy that has been applied by other Latin American countries in embracing free-market policies.

In an effort to stem economic decline, the government last year allowed people to be legally self-employed in many lines of work, and has begun streamlining state firms, eliminating some and merging others. The next drive for efficiency is expected to include cutting jobs from the large bureaucracy. The government, under pressure as a result of severe food and fuel shortages, has given itself until the end of the year to complete the overhaul.