The government "agreed to broaden the exercise of self employment and its use as another alternative for the employment of those excess workers," Castro said during a biannual session of the National Assembly.

He went on to say that the government would eliminate "numerous" prohibitions to the granting of licenses for private businesses and to the sales of some products, as well as "make the contracting of a work force more flexible."

In exchange, those businesses will pay taxes on income and sales, and pay contributions for employees, he said.

The measures "constitute a structural and conceptual change in the interest of preserving and developing our social system to make it sustainable in the future," Castro said.

The decision was part of a series of measures approved by the Council of Ministers to reduce "the considerably inflated payroll in the state sector," he added.