The Oversight Board seeks to certify today a new fiscal plan that will focus on the government making the necessary adjustments to provide better education and public health services while postponing the previously contemplated budget cuts for one year.
The Board´s decision is a response to the effect that the coronavirus is beginning to have on Puerto Rico’s economic and financial conditions, explained Board Executive Director Natalie Jaresko, who said the pandemic would speed up the government’s budget deficit for about six years and reduce by almost two-thirds the funds available to pay bondholders.
Puerto Rico could not honor its legal obligations before, now it can afford even less, Jaresko said, noting that the new fiscal projections are based on what she estimates will be five years of economic contraction as a result of the pandemic.
According to Jaresko, over the next five years, as the coronavirus translates into less income and tax revenues, the surplus available to pay bondholders will drop to about $8 billion or 65 percent less than the money previously available to creditors.
According to the fiscal plan to be adopted by the Board, the Treasury’s collections will drop by about $1.3 billion and by another $1.2 billion in fiscal year 2021.
These projections could fall short since the Fiscal Agency & Financial Advisory Authority (FAFAA) indicated yesterday that in just eight weeks of lockdown, the Treasury’s collections dropped by $1.433 billion.