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Cubans are all set to face a new wave of inflation after the government shared an austerity plan last week, including a five-fold surge in gas prices from Feb. 1 onwards.

Cuban economist Omar Everleny explained that sharp price increases in the economy will not only impact one area negatively but will also have consequences for other sectors. Additionally, consumers may experience a significant increase in inflation ranging from 400% to 500%.

Many residents in Havana, the capital of Cuba, have shared that there has been an increase in the price of several commodities since the government's announcement.

A taxi driver named Luis Moreno, who worked in Havana for 14 years, said he has to keep the hiked prices for cab fare from now onwards as he doesn't have a choice. "If you raise prices on one thing, it's bound to affect another," he said, Reuters reported. "It's not just fuel, it's food... Everything is very expensive."

Last year, Cubans witnessed a lower rate of inflation of 30%, which was 38% in 2022. However, this rate was shared by the government but many economists claimed that those rates were not close to the reality as the government did not adequately analyze a boom in the informal market.

The government announced last week that wholesale fuel prices will increase by 100% next month, while freight transportation will also see an increase between 40% to 60% in March. On the other hand, the import duties on the private sector will be five times more than the current rate.

Moreover, the government will be charging an additional 10% sales tax on wholesale transactions to private companies.

A former Cuban central bank employee economist Pavel Vidal, who is currently working as a teacher in Colombia, said that "adjustment of prices are necessary measures to rein in the fiscal deficit."

Although many other economists, including Vidal, believe that it is also important to open the economy to private players as now most of them are dominated by state-owned enterprises, noting that privatization will boost the country's economy.

"Nowhere do I see emphasis dedicated to increasing manufacturing, or increasing agriculture," Everleny said.

Havana University economist and small business owner Oscar Fernandez urged the Cuban government to loosen the rules and regulations on private players, who are now on the verge of announcing bankruptcy, calling the new austerity plan like a ticking inflation bomb.

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