For the first time in two decades, Puerto Rico plans to balance its budget without selling debt, said Governor Alejandro Garcia Padilla’s chief of staff.
Garcia Padilla’s proposed financial plan for the fiscal year beginning July 1 relies mostly on spending cuts, Ingrid Vila Biaggi said yesterday in a telephone interview from San Juan. The administration will also raise additional funds through “revenue enhancements,” she said.
The 42-year-old governor will release the plan as soon as today. He’s set to give his State of the Commonwealth speech at 5:30 p.m. local time, where he will also announce a four-year roadmap that will “transform” Puerto Rico’s economy and social demographics by 2018, Vila Biaggi said.
“It is a budget that will serve as a foundation to building Puerto Rico’s recovery,” Vila Biaggi said.
The governor will also release a capital-improvement plan, she said. Vila Biaggi declined to give specific details on the budget or capital plan.
The four-year agenda will provide opportunities and identify actions to reposition Puerto Rico’s economy, Vila Biaggi said. The Puerto Rican economy has declined in five of the past seven fiscal years. The commonwealth and its agencies owe $73 billion, according to bond documents.
The long-term strategy won’t include restructuring the island’s debt load, she said.
“We are not, at this point, contemplating any type of restructuring in the public corporations or in the central government,” Vila Biaggi said.
The three largest rating firms dropped Puerto Rico credit below investment grade in February because of limited liquidity, after citing the use of deficit financing in earlier downgrades.
Puerto Rico sold $3.5 billion of tax-exempt general-obligation debt March 11 at 93 cents on the dollar to balance budgets and repay debt, the biggest junk-rated muni borrowing ever. The bond traded yesterday at an average price of 89.78 cents after trading as low as 86 cents on April 11 and as high as 99 cents on March 12, data compiled by Bloomberg show.
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