The Strategist

Puerto Rico unveiled a budget recovery plan

06/01/2017 - 12:02

The Governor of Puerto Rico, Ricardo Rosselo, published a spending plan of $ 9.6 billion. According to the paper, a fifth of the island state’s budget will be allocated to pay civil servants, as pension funds may lose all funds in July, Bloomberg reports.

Alex Barth via flickr
Alex Barth via flickr
This is the first budget of the US-dependent territory, since the federal supervisory board has received ample powers to review its expenses under the US Puerto Rican rescue law passed last year to help the state cope with the increasing financial crisis. This is happened after the island resorted to bankruptcy procedures, seeking to reduce the arrears of $ 74 billion.

The budget is largely in line with the financial recovery plan approved by the Supervisory Board in March, which promised a serious reduction in debt to bondholders.

The budget implies allocation of about $ 400 million in principal and interest, which is part of $ 3.26 billion for the fiscal year, begins on July 1. The Puerto Rican authorities should also cover pension payments of $ 2 billion as they mature.

"We need to protect one of the most vulnerable layers of our people: our recipients of pensions, who were threatened with a complete loss of pension", Rossello said.

Earlier, the authorities of Puerto Rico filed an appeal to the US District Court in San Juan in early May with a request for protection from creditors and restructuring of the debt in the amount of $ 70 billion.

The governor of the island state Ricardo Rosello said that the authorities had not managed to reach any compromise in numerous negotiations with creditors, and he sent a request to the federal supervisory commission, asking to transfer the case about Puerto Rico's debt to the court.

Puerto Rico is not formally part of the US, being in fact only a US-dependent territory, and cannot benefit from the US bankruptcy law. The bankruptcy procedure of Puerto Rico will be conducted under a special system, the permissible parameters of which were approved in 2016 by the Congress of the country.

In modern history, debt restructuring of $ 70 billion will be the largest for territories that are part of the US or associated with them.