Facing the prospect of seeing its bonds downgraded to junk status, the Puerto Rican government announced Monday that it will move up by one year its commitment to eliminate the budget deficit and that in the coming weeks it will present a balanced budget for fiscal year 2015.
In addition, the government said it will ask the island’s legislature to reduce spending in fiscal 2014, which ends June 30, by 20 percent from $820 million to $650 million.
A balanced budget was a goal that the government set for itself for fiscal year 2016, but it is able to move it up by a year thanks to the fact that it has been responsible in dealing with fiscal problems, Ingrid Vila Biaggi, chief of state to Gov. Alejandro Garcia Padilla, said in a communique.
Puerto Rico, now carrying $70 billion in debt, intends to return to the debt markets in the coming weeks for the first time since August.
In the markets the possibility is being considered that Puerto Rico may see itself compelled to pay interest of 10 percent to sell some $2 billion in bonds, more than double what it had to pay a year ago, The Wall Street Journal said.
“To balance the budget, we will not need to utilize contingent reserves and additional expenses that were factored into the current budget,” Carlos Rivas, director of the Puerto Rico Office of Management and Budget, said Monday.
“We have also identified special assignments that agencies can cover on their own or through their current budget. Finally, we have also adjusted agencies’ operating budgets, including payroll and service contracts, which will be implemented by agency heads by applying discipline, austerity and creative management,” he said.
Rating agencies are rating Puerto Rico’s debt just one step above junk status and describe the outlook for it as negative.
“It’s possible that the storm will never arrive. We have been avoiding that storm and if it comes we have to face it as adults. And there are people who are going to play politics with that and they are the same ones who got us into this disaster,” Gov. Garcia Padilla said Monday.