NEW YORK — The mounting national debts incurred by developing countries and owed to international creditors is dragging those nations into an “abyss,” Cuba’s leader said Wednesday at a conference at the United Nations in New York, at a time Cuba itself has defaulted on payments to a group of creditors.
“Immediate action is needed to urgently address the unsustainable external debt dragging most developing nations into the world’s abyss,” Miguel Díaz-Canel, Cuba’s handpicked president, said in a brief address at the Financing for Development conference.
Speaking as the temporary chairman of the G-77 plus China, a group of 134 U.N. member nations that recently met in Havana, he called for “an inclusive and effective solution with the participation of all creditors” so that developing countries can invest in their development.
The way international financial institutions, like the International Monetary Fund, function must be reformed, he said, echoing calls by other leaders to increase the participation of developing nations in the decision-making process.
Speakers at the event highlighted that the COVID-19 pandemic, climate change, increasing poverty and economic shocks have made financing for development a more difficult but urgent goal.
Cuba is particularly vulnerable on that front because the communist country has been excluded from international financial institutions like the International Monetary Fund and the World Bank.
Decades ago, under the rule of Fidel Castro, Cuba defaulted on its foreign debt, which he at the time declared “unpayable.” But the country later got debt relief from Russia and 14 nations in the Paris Club, a group of the world’s richest countries. They agreed to cancel $8.5 billion in overdue interest payments in exchange for a promise by Cuba to pay off $2.6 billion of the original debt — on which first defaulted in 1986 — over 18 years through 2033. The group of Cuban creditors includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland and Britain.
The 2015 deal with the Paris Club, after the United States restored diplomatic relations with Cuba, was seen as a first step for a future incorporation of Cuba back into the international financial system.
But the country has defaulted on payments since 2019 and has tried to get relief. In September, Paris Club representatives traveled to Havana and Cuban officials again asked for a moratorium on debt repayments, blaming U.S. sanctions and the pandemic for the delays.
“I reiterate the will of the Cuban government to honor the commitments assumed with our creditors” when conditions improve for the island, said Foreign Trade Minister Ricardo Cabrisas in a video of the meeting shown on Cuban state television.
The country is also battling a lawsuit in court in the United Kingdom by investment firm CRF-I Ltd over two unpaid loans of $78 million in a case against the Banco Nacional de Cuba.
Experts agree that it’s unlikely that Cuba will be able to honor its debt commitments, as the country is going through one of its worst economic crises. The economy has not recovered from the pandemic, tourism has not rebounded, aid from key partner Venezuela has dwindled, and sanctions originally imposed by the Trump administration on remittances from abroad have significantly reduced the money going to government coffers.
Though the government keeps its foreign-currency reserves secret, former economy minister Jose Luis Rodriguez reported Cuba’s international reserves as $11.528 billion in 2019 in a column published in the official news site Cubadebate. He said that number declined an additional $2.5 billion through 2021.
But the government’s reluctance to implement urgent market reforms and legal changes to attract foreign investment is a significant obstacle to the country’s development.
In 2011, now retired general Raúl Castro laid out some reforms but failed to deliver on the plan approved by the Communist Party. It took Cuban authorities another decade to authorize Cubans to own small and medium enterprises. Since then, private entrepreneurs have become significant importers of food and basic supplies, accounting for 50 percent of the cargo container traffic to Cuba from the United States, a Biden administration official told the Miami Herald. But several restrictions, including limits on using cash, are threatening their growth.
The Cuban government has yet to authorize foreign investments in these private enterprises and has signaled that it would not change its laws to offer standard protections to foreign investors.
It is unclear what is stopping the Cuban government from acting with urgency to address its economic and debt crises. Still, Díaz-Canel said he hopes the Wednesday event would help to “urgently foster political will to implement what we all know is necessary to overcome one of the most complex crises that humanity has witnessed in modern history.”