Puerto Rico Board Disapproves Governor’s Fiscal Plan For Debt Servicing
After being rejected by the federally-appointed oversight board, Puerto Rico government decided to revise its plan to achieve the goal of improving its fiscal standing. The draft plan presented by Governor Ricardo Rossello provides an outline to the $33.8 billion in the spending cuts and new revenues.
According to the Street Insider, Puerto Rico has projected to have $1.2 billion a year for debt servicing which is 30 percent of what the country owes in the next fiscal year. The board which is supposed to look and approves the proposal said that plan was made in an overly-optimistic revenue projection.
The board has given Puerto Rico a time to revise the plan and present it again. Governor Ricardo Rossello has been non-committal whether he would make a new scheme, believing that the previous proposal he presented was sound. The governor even discusses the potential changes of the proposal to the board.
However, in the interview with the Governor's liaison, Elias Sanchez, the government is planning to submit a revised plan on the deadline given by the board. Puerto Rico officials have been tweaking the plan and will add more initiatives to the different areas.
According to Bloomberg, Puerto Rico is trying to restructure the $70 billion in debt due to 45 percent poverty rate and shrinking population. Puerto Rico Governor Ricardo Rossello first draft of the plan proposes cuts to healthcare spending and pension benefits which could create $33.8 billion over ten years through multiple spending cuts as well as $12.9 billion in new revenue.
However, the Board announced that Governor Ricardo Rossello's plan is overly-optimistic for Puerto Rico's economic growth. It was also found out that the projections of the governor failed to reflect near-certain declines in baselines revenues which are associated with corporate tax and non-resident withholding tax. A revision and resubmission of Puerto Rico's plan was encouraged and must be submitted by the given deadline.