Puerto Rico, which has a lower credit rating than any U.S. state, plans to eliminate borrowing to close budget deficits by fiscal 2014.
The governor’s $9.08 billion 2013 budget proposal includes a $933 million funding gap, down from the $1.4 billion shortfall for the year ending June 30, said Juan Carlos Batlle, president of the Government Development Bank for Puerto Rico. He spoke at the Puerto Rico Credit Conference in San Juan.
Puerto Rico will restructure debt to push off $600 million of principal and interest payments due in fiscal 2013, Batlle said. That is on top of a $333 million budget deficit that the administration plans to close, in part, by using its sales-tax credit to borrow $100 million from a bank rather than selling municipal debt, he said.
The 2012 budget included a $610 million gap and the commonwealth restructured debt to skip about $800 million of debt-service payments this year. Puerto Rico will end its practice of borrowing to balance spending in fiscal 2014, Batlle said.
“That will eliminate the need to issue additional debt and we’ll only have to use debt either for refunding purposes for savings, or money for infrastructure projects like roads and bridges and whatever we need,” he said in an interview at the conference.
Moody’s Investors Service rates Puerto Rico’s general-obligation debt Baa1, three steps above speculative grade, with a negative outlook.
“They are making efforts to get closer to structural balance,” a Moody’s analyst, Emily Raimes, said in an interview at the conference. “They are taking the steps to getting there.”