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NEW YORK (Reuters) - Puerto Rico's federally appointed financial oversight board revealed on Tuesday a fresh budget deficit projection prepared by the outgoing government that is $10 billion more than forecast in October, the board said in a statement.
The government of Puerto Rico will now face a budget deficit of $67.5 billion over the next 10 years if there are no changes made to its current laws, no new federal funding or any reduction in expenses, increases in revenue, structural reforms or restructuring of its long-term debt and pension obligations, the statement said.
"According to the Revised Baseline Projections, the deficit the Government of Puerto Rico faces over the next 10 years is so large, that even if Puerto Rico's entire debt were to be wiped out (which is legally and equitably not an option), the Island's government would still be in the red," the board said referring to data provided by the outgoing governor Alejandro Garcia Padilla's administration.
Created by the U.S. Congress this year under the Puerto Rico rescue law known as PROMESA, the board is working on debt restructuring talks with holders of Puerto Rico's $70 billion in bonds in an effort to pull the struggling island out of a crisis marked by a 45 percent poverty rate and shrinking population.
The bipartisan, seven-member board must approve the island’s annual budgets. In November it set a target date of Jan. 31, 2017 to certify a fiscal turnaround plan that will now be presented by the U.S. commonwealth's incoming governor, Ricky Rossello.
Puerto Rico's financial meltdown was decades in the making, representing a combination of shifting tax policies with the mainland United States and an historic dependence on mainland corporations to drive economic development and growth.
As a result, the island's economy descended into the largest municipal debt crisis in U.S. history.
The oversight board said it would, this week, begin coordinating good faith conversations with creditors to work toward a comprehensive debt restructuring.
"We will provide guard rails to ensure compliance, discipline and that the government stays the course. But the task of determining what measures it will implement belongs to the Government of Puerto Rico in the first instance," said Board Chairman Jose Carrion.
"If the Government were to fail to propose a fiscal plan certifiable under PROMESA, then the Oversight Board could go further. But, that is not what it wants to do,” he said.
Reporting By Daniel Bases; Editing by Chizu Nomiyama