Expired letters of credit (L/Cs) are contributing to Cuba's worsening financial crisis according to Cuban economy minister, Ricardo Cabrisas.

The minister says Cuba is having difficulty obtaining trade credit due to late payments to suppliers, and he expects the two-year-old economic crisis to worsen this year.

Unpaid L/Cs

Cabrisas told a televised session of the National Assembly that export revenues through June fell short of expectations by US$400 million, "due to difficulties in using credits...and debts on expired L/Cs that have not been paid."

He anticipates that imports in 2017 would continue to decline and earn US$1.5 billion less than planned for the year.

Credit crunch

Trade finance has become increasingly tight as a result of importers' poor payment record according to the minister.

Cabrisas said that whereas 85 per cent of imports were financed by commercial credit in 2016, only 40.8 per cent of imports were able to use conventional trade finance in May 2017.

This means the import-dependent country will need to seek more government debt to keep supplies flowing.

Venezuelan factor

Reduced shipments from political ally Venezuela of subsidised oil to feed Cuba's export refineries are a key factor in Cuba's worst economic crisis for more than 20 years.

Growth in other areas of the economy, including a booming tourism sector and agriculture, does not sufficiently compensate the increased cost of the Caribbean island's soaring fuel bill.

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