Puerto Rico mulls debt moratorium, other options amid crisis

AP News
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Posted: Feb 17, 2016 4:00 PM
Puerto Rico mulls debt moratorium, other options amid crisis

SAN JUAN, Puerto Rico (AP) — Puerto Rico may suspend debt payments and order independent agencies to take over some public corporations to confront a worsening economic crisis, officials said Wednesday.

These and other emergency measures are being considered as the government's liquidity continues to dwindle, said Gubernatorial Chief of Staff Grace Santana.

"The government lacks the money needed to keep providing essential services ... and meet debt payments due on May 1 and June 1. It's a fact," she said, referring to the more than $1.1 billion due soon.

The announcement came just hours after the government released a long-awaited financial report that said there is "substantial doubt" the island's public agencies can keep operating under current fiscal constraints.

The 370-page report released Tuesday said the Government Development Bank, which is the local government's main source of short-term liquidity, could run out of money to operate and honor its obligations. It also said that the island's retirement systems could soon collapse.

The report found that the government's deficit increased by $2.5 billion in fiscal year 2014 for a total of $49.2 billion, in part because of higher operating expenses and an increase in liabilities including bonds. Meanwhile, the government's net position decreased by $1.7 billion during that period.

Puerto Rico has been pressuring the U.S. Congress to obtain a restructuring mechanism to help it cope with $72 billion in public debt that the governor has said is unpayable. Some Republican legislators had demanded to see the financial report, which is 10 months overdue and has not yet been audited.

Treasury Secretary Juan Zaragoza said Wednesday that an audited version would be available in upcoming months and said there is nothing in the financial statement that people already didn't know.

Gov. Alejandro Garcia Padilla criticized some U.S. legislators for not acting on Puerto Rico's crisis because it had not released its financial statement.

"The risk of Congress not providing such framework, which costs nothing to U.S. taxpayers, is condemning Puerto Rico to a legal morass that will jeopardize essential services for U.S. citizens living in Puerto Rico, further accelerate outmigration to the U.S. mainland and severely impair creditors' ability to recover on their claims," he said.

U.S. House Speaker Paul Ryan has pledged action by end of March.

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