Agreement with the Paris Club Addresses Only a Fraction of Cuba's Debt

The recent arrangement between the Cuban government and the Paris Club, finalized on January 17, 2025, accounts for a mere 16.2% of the total debt of the island, which was estimated at $28.5 billion by the end of 2023. While this refinancing offers temporary relief, the sheer size of the overall debt remains a significant hurdle for Cuba's economy, which is grappling with a severe crisis and tarnished reputation among creditors and international partners.

Cuban economist Pedro Monreal points out that the renegotiated debt with the Paris Club, which stood at $4.62 billion at the end of last year, is only a small part of the island's total financial obligations, encompassing both official and private debts. Despite its relative size, this agreement is crucial for momentarily mitigating default on sovereign debt, a factor that directly affects Cuba's "country risk" and its access to international financing.

The Historical Context of Cuba's Debt with the Paris Club

Cuba has long had a complex relationship with the Paris Club, a group of 14 creditor nations, including France, Spain, Japan, and the United Kingdom. In 2015, the island achieved a significant debt forgiveness, reducing its liabilities from $11.1 billion to $2.6 billion, with a payment plan extending to 2033. However, the ongoing economic crisis has hindered the fulfillment of these obligations, prompting renegotiations in 2021 and 2025. The most recent agreement, signed in Paris by Deputy Prime Minister Ricardo Cabrisas and Paris Club representatives, alters the previously established terms in an effort to ease financial pressure on the island.

During the meeting, the Cuban delegation highlighted the country's challenging economic situation, marked by GDP contraction, currency shortages, the prolonged impact of the post-pandemic crisis, and U.S. sanctions.

Economic and Financial Repercussions

While the refinancing with the Paris Club offers short-term respite, Cuba's total debt remains an unsustainable burden. The Economist Intelligence Unit (EIU) estimated that the country's total debt would reach $28.7 billion by the end of 2024, a figure that experts believe severely limits economic recovery possibilities. Cuba also struggles to secure new financing due to its history of defaults and lack of transparency in public accounts.

The debt restructuring with the Paris Club might temporarily improve risk perception but fails to address the structural problems of Cuba's economy, which continues to rely on external financing sources and remittances.

Future Challenges and Prospects

The Cuban government has opted for a constant renegotiation strategy of its external debt as a means to buy time amid liquidity shortages. However, economists warn that without deep structural reforms to encourage foreign investment, enhance productivity, and diversify income sources, the island will remain trapped in a cycle of debt and restructuring.

In this context, the new agreement with the Paris Club is viewed as a temporary fix that does not tackle the root causes of Cuba's economic crisis. The country continues to face a growing fiscal deficit, rampant inflation, and declining output in key sectors like tourism and agriculture.

In conclusion, although the agreement with the Paris Club represents a positive step to avert immediate financial collapse, Cuba's total debt remains a major issue. The island's economic sustainability will depend on its ability to generate its own income and implement policies that promote long-term growth and stability, with enough credibility to gain access to financing from international public and private entities.