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March 7 (Reuters) - 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 million.
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 liquidity-boosting measures.
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 annual budget.
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 March 15.
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)