New Puerto Rico fiscal plan shows $3.4B shortfall before debt costs

The government of Puerto Rico is expecting a funding gap of $3.4 billion through fiscal year 2022, before any debt service is paid, as the bankrupt island deals with hurricanes Irma and Maria that devastated Puerto Rico in September 2017.

In the previous fiscal plan in March 2017, Puerto Rico's government was expecting a cash flow surplus of $3.7 billion for debt payments through fiscal year 2022. According to a revised fiscal plan, the government will post a deficit before debt service for four years, with a $27 million surplus in fiscal year 2022.

In addition to disaster relief assistance, Puerto Rico will need an external liquidity facility to bridge the gap through fiscal year 2021 until fiscal measures are fully implemented. The availability of this funding source is "a critical risk" to the success of the new fiscal plan and the long-term viability of Puerto Rico, the government said.

The island's debt burden is higher than the average of 10 states with the highest debt burden, with a debt to gross domestic product ratio of 55.1%, compared to 6.0% for the highest 10 states average.

Real gross national product for fiscal year 2018 is projected to contract by 11.2% due to the economic impact of the hurricanes but is expected to bounce back in the subsequent year to a 7.6% growth, before easing to a 1.5% growth in fiscal year 2022. The prior fiscal plan projected a 3.9% decline in fiscal 2018, which was due to improve to a 1% fall in fiscal 2022.

Puerto Rico increased the estimate of inflation for fiscal year 2018 to 2.1% from 1.2%.

By Ayesha Hassan
New Puerto Rico fiscal plan shows $3.4B shortfall before debt costs