March 7 Puerto Rico's government on Tuesday
announced measures to preserve liquidity as it combats a $70
billion debt crisis, saying it would freeze some special
appropriations to boost general fund coffers by more than $625
In a press conference on Tuesday, Elias Sanchez, an adviser
to Governor Ricardo Rossello, said a new analysis of the
island’s financial data shows an additional $500 million funding
gap for fiscal year 2017, prompting the government to push the
The Fiscal Agency & Financial Advisory Authority, the
island's primary fiscal agent, issued an order that would freeze
about $1.8 billion in so-called special appropriations, which
consist of government money legislated in previous years to
finance particular projects not included in the U.S. territory's
Sanchez said the government would use the freeze to try to
find $625 million it could bring back into the general fund to
shore up finances.
“With the $625 million in savings, we could close the
gap projected by the analysis, allowing us to have a balanced
budget [by fiscal year 2019]," said Sánchez.
A federally appointed board overseeing Puerto Rico's
finances has directed the island to construct a fiscal
turnaround plan that would balance its budget by 2019. Rossello
last week submitted a draft of that plan, which must be approved
by the board.
The board can seek changes or introduce its own turnaround
proposal if it feels Rossello's will not work. It has said it
aims to approve a turnaround plan for the island in some form by
Liquidity is tight on the island. Puerto Rico could run out
of cash sometime this calendar year, or as early as May if
courts rule it must pay a mountain of debt coming due.
The island is protected from paying debt under a freeze on
litigation over defaults, a measure designed to give it time to
reach consensual restructuring deals with bondholders without
having to worry about lawsuits.
But the freeze is slated to run out on May 1, and while the
government would like to extend it, doing so would require an
act of the U.S. Congress.
Tuesday's order would also temporarily suspend the granting
of a slew of existing tax credits, which Sanchez said could
result in an additional $75 million.
"With these measures, we are exerting greater control over
revenues and spending," Sanchez said.
(Reporting by Nick Brown and a contributor in San Juan; Editing
by Dan Grebler)