The federal control board that oversees Puerto Rico’s finances on Wednesday approved a revised fiscal plan that temporarily suspends all budget cuts and predicts that the island’s surplus could fall 65% because the government is unable to meet obligations. current debt.
The plan will serve as a draft for the island, which has been severely affected by hurricanes, earthquakes and the coronavirus pandemic while it continues to restructure part of its public debt of more than 70,000 million dollars.
Natalie Jaresko, executive director of the board, said the Puerto Rican economy will contract in the next five years and that the surplus will drop from $ 23 billion to $ 8 billion between fiscal years 2020 and 2032. She declined to indicate how the crash would affect to the payment of Puerto Rico’s debt, simply saying that the island cannot afford its existing contractual obligations and that the board will meet with mediators and creditors to discuss the next steps to take.
“The impact of the COVID-19 pandemic in Puerto Rico is severe,” added the official, indicating that the revised economic projections are similar to those issued after Hurricane Maria hit the island in September 2017.
Board President José Carrión said suspending budget cuts for a year will allow the government to improve how it operates and implement necessary reforms in the labor sector and other areas.
The modified fiscal plan comes less than a week after Congressman Raúl Grijalva presented amendments to a law that created the board as part of a financial package for Puerto Rico.
The project calls for an audit of Puerto Rico’s debt and declares public health, education, security and pensions as essential public services, thereby protecting them from funding cuts. In addition, the measure would guarantee financing for the University of Puerto Rico and allow the local government to reduce part of the debt. The project was presented amid criticism that the junta is not protecting Puerto Ricans and has not done enough to improve the situation on the island.
“The devastating fiscal austerity imposed by the original law has not been able to improve economic development or solve chronic poverty in Puerto Rico, so it is time to adopt a position that focuses more on the people,” Grijalva said in a statement late. from last week.
Hurricanes Irma and Maria, coupled with a recent series of earthquakes, have caused billions of dollars in damage and exacerbated an existing economic crisis. Then the pandemic came, and experts warned that an island with 3.2 million inhabitants and a poverty rate of over 40% – the highest compared to any state in the United States – could record an unemployment rate of more than 40%. Some economists estimate that the COVID-19 crisis will cause economic losses of between 6,000 and 12,000 million dollars.