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Cuba Studying Potential Use of Cryptocurrency to Boost its Economy

Cuba's inefficient state-run economy is facing a crisis due to a sharp decline in Venezuelan aid, lower exports

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FILE - Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies, Feb. 13, 2018. Switzerland's government wants to look into the feasibility of launching its own state-backed cryptocurrency. VOA

Cuba’s Communist government said on Tuesday it was studying the potential use of cryptocurrency as part of a series of measures to boost its economy amid a deepening crisis exacerbated by U.S. sanctions.

Cryptocurrency, which allows financial operations to be carried out anonymously, has been used in the past to get around capital controls. Cuba’s top ally Venezuela introduced a cryptocurrency last year aiming to avoid U.S. sanctions and weather hyperinflation, although it never properly got off the ground.

Cuba’s inefficient state-run economy is facing a crisis due to a sharp decline in Venezuelan aid, lower exports and the tightening of the decades-old U.S. trade embargo under President Donald Trump.

The new measures, announced on a roundtable on state-run TV by President Miguel Diaz-Canel and his government, will raise income for around a quarter of the population and deepen market reforms of one of the world’s last Soviet-style command economy’s started by the island nation’s previous president, Raul Castro.

Cuba, Cruptocurrency, Economy
Cuba’s Communist government said on Tuesday it was studying the potential use of cryptocurrency. Pixabay

The aim is to raise national production and demand in order to boost growth as U.S. sanctions target tourism and foreign investment. Diaz-Canel, working to establish his legitimacy after assuming the presidency in April 2018, said the government was working on the details of the implementation.

“We are studying the potential use of cryptocurrency … in our national and international commercial transactions, and we are working on that together with academics,” Economy Minister Alejandro Gil Fernandez said.

The most popular measure in the new package will likely be the hikes in some pensions and wages for workers in public administration, social services and state-run media, bringing the medium monthly wage in those sectors up to the equivalent of $44.5 from around $25 previously.

Many Cubans say the measure still will not be sufficient to breach the gap between salaries and the cost of living.

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Nonetheless it should boost purchasing power, as long as inflation is kept in check.

“It’s not ideal, but it’s an advance,” said Pavel Joaquin Hernandez, 46, a general practitioner who will go from earning the equivalent of around $40 per month to $64.

Cuban economist Omar Everleny said the raise was crucial given how demotivated workers were, with many emigrating.

“For the first time, (the government) is linking the fact that everything can be achieved if workers are motivated,” he said.

Cuba, Cruptocurrency, Economy
Cryptocurrency, which allows financial operations to be carried out anonymously, has been used in the past. Pixabay

Gil Fernandez said the government was also broadening a series of measures aimed at decentralizing and thus improving state-run company performance and stimulating local production, substitution of imports and increasing exports. For example, he said, financial service companies would be established to provide cash in the face of opportunity more quickly than the centralized planning system.

The government would also expand a system allowing some companies to keep a percentage of the hard currency they earn in order to reinvest it immediately rather than have to apply for credit.

State companies, agricultural entities and other economic actors that supply a growing number of firms in the Mariel Special Economic Zone, a project resembling China’s first capitalist oasis, would receive a percentage of sales in hard currency, Gil Fernandez said.

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The government was also studying how to allow the growing number of small private businesses to export through the state-run businesses, he said. (VOA)

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India Still Projected To Be The Fastest Growing Economy Among G-20 Nations

India is still projected to be the fastest growing economy in FY20 among the G-20 nations, says Finanace Minister

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Economy, Nirmala Sitharaman
FM Nirmala Sitharaman stated that India is still projected to be the fasteat growing economy. Wikimedia Commons

Finance Minister Nirmala Sitharaman on Monday said in the Lok Sabha that growth has decelerated, but there is no slump and India is still projected to be the fastest growing economy in FY20 among the G-20 nations.

She said the government has been taking several measures to address moderate levels of fixed investment rate in the economy, plateauing of private consumption rate and a modest export performance, with a view to increasing the GDP growth.

In a written reply, Sitharaman said India’s economic growth decelerated but its economy is still the fastest growing among G-20 nations and that the goal of $5 trillion economy will be achieved by 2025.

In a written reply to a question from N.K. Premachandran, MP from Kerala, that despite some recent deceleration in growth, India’s economy was still projected by the World Economic Outlook to grow at the fastest rate among G-20 countries in 2019-20.

“During the last five years, the government has implemented major reforms to build the investment climate in the country for becoming a $5 trillion-dollar economy,” the minister said.

The World Economic Outlook (WEO) of October 2019 projects a significant slowdown in world output and trade in 2019. Yet India, despite some recent deceleration of GDP growth, is still projected by WEO to grow at the fastest rate in 2019-20 among G-20 countries, she said.

On a question whether the government has analysed the impact of implementation of the Goods and Services Tax (GST) on economic slowdown, Sitharaman said the GST reform stands out as the most important measure for improving ease of doing business in the country.

“Further, in the World Bank’s Ease of Doing Business 2020 Report, India’s ranking improved by 14 positions to 63 in 2019 from 77 in 2018 after GST was implemented in 2017,” Sitharaman said.

Indian Economy
Despite the deceleration in economy due to declining GDP , India is still projected by WEO to grow at the fastest rate in 2019-20 among G-20 countries. Pixabay

On the impact of implementation of foreign trade agreements and economic slowdown, she said the government publishes an economic survey of the country on an annual basis analysing various aspects of the economy, including trade agreements and state of the economy. “The government has also been engaging with various stakeholders to understand their concerns and taking appropriate measures for the economy,” she said.

Sitharaman said while taking reform measures, the administration has kept inflation low, fiscal spending disciplined and current account deficit manageable to ensure macroeconomic stability for a healthy investment climate in the country.

India’s economic growth slowed down to 5% in the Q1 and is expected to have declined further in the second quarter for which official data is expected later this month.

In her statement Sitharaman further said the 15% corporate tax rate for new domestic manufacturing companies announced in September was “amongst the lowest in the world”.

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For other domestic companies not availing of any tax breaks, the rate was cut from 30% to 22%.

She also pointed out the recent move to reduce corporate tax rate from 30 percent to 22 per cent complemented by a cut in the repo rate by 135 basis points during 2019 by the Reserve Bank of India and mandating of banks to link their lending rates with external benchmarks for reducing the cost of capital for investors. (IANS)