Debt-ridden Puerto Rico is facing a marked slowdown in new revenues, and even under a best-case economic growth scenario would be able to make just a fraction of the loan payments due over the next decade, officials said Monday.
Revised figures from the government’s fiscal and economic recovery plan show that the commonwealth’s long-running recession and fiscal crisis have crippled tax revenues and left the island in a ever-worsening cash-flow situation, even as it has slowed payments to suppliers, creditors and taxpayers due refunds.
The result is that Puerto Rico is sinking deeper into a fiscal hole that officials there said can only be filled with the help of comprehensive debt restructuring — which they have been pushing for many months, but to no avail.
“The information contained in the updated plan makes all the more clear that actions must be taken before the Commonwealth runs out of options to pay its debt and provide essential services to the people of Puerto Rico,” said Melba Acosta Febo, president of the island’s Government Development Bank.
The disclosure by Puerto Rico officials, which comes shortly before a meeting with creditors, seems to be aimed at prodding bondholders to cut a deal to offer Puerto Rico debt relief and to encourage Congress to give the island the ability to restructure its debt in an orderly fashion through some bankruptcy-type progress. Unlike cities such as Detroit and Vallejo, Calif., Puerto Rico cannot file for bankruptcy, a situation that Puerto Rican officials said could lead to years of contentious litigation and economic unraveling as creditors wage legal battles to collect from the cash-strapped U.S. territory.
In September, a group of economic officials unveiled a plan aimed at sparking economic growth and laying out the gravity of the island’s fiscal crisis, which has left Puerto Rico more than $70 billion in debt.
In the intervening months, the fiscal picture has worsened, officials said Monday, even as the island has skipped some small debt payments and technically defaulted on others.
House Speaker Paul Ryan (R-Wis.) has promised some action on Puerto Rico by the end of March. Still, many Republican members of Congress and some creditor groups have been leaning on Puerto Rico do more to pay its loans without restructuring its debt. They say the island should further cut government spending, tighten its administrative processes and look into privatizing government property before asking creditors to take a hit.
In recent months, the island has resorted to fiscal tricks and clawbacks of money set aside to pay back other loans to avert a catastrophic default. But officials now say large defaults are inevitable in the coming months if it is unable to restructure its debt.
“Time is running short,” Acosta said.