Tags: puerto rico | debt | not | payable | 72 billion

Puerto Rico Debt 'Not Payable,' Governor Padilla Admits

Image: Puerto Rico Debt 'Not Payable,' Governor Padilla Admits
(Christopher Gregory/Getty Images, file)

By    |   Monday, 29 Jun 2015 11:55 AM

Puerto Rico's debt "is not payable," the commonwealth's governor said this week as he called for new, sweeping concessions from island's creditors.

“The debt is not payable,” Gov. Alejandro Garc√≠a Padilla told The New York Times. “There is no other option. I would love to have an easier option. This is not politics, this is math.”

The island is $72 billion in debt, or about 70 percent of its economic output with a shrinking tax base, according to The Wall Street Journal. The commonwealth's assessment appears especially bleak after the central government worked with the former officials of the International Monetary Fund officials to come up with a long-term plan.

"This is going to be painful for the next two to three years," Rep. Pedro Pierluisi, the island's representative in the U.S. House, told The Journal. "The government is facing serious cash-flow issues."

Government deficit spending, rocketing energy cost, and a tax base that has dwindled since the end of the Cold War has dragged Puerto Rico's economy down into economic peril for years to the point of default, according to CNN Money.

Padilla is now asking to defer some debt payments, or extend the repayment schedule in an effort to "share the sacrifices" with the island.

In one financial showdown, Puerto Rico's government-run electricity provider PREPA is expected to miss a $400 million payment to creditors, which is due Wednesday, CNN Money noted. The electric company is already $9 billion in debt.

Bond rater Moody's Investors Services has already dropped the electric company's bonds to its lowest category.

The New York Times reported that Puerto Rico's bonds now have a face value about eight times that of Detroit's, which filed for bankruptcy in 2013, becoming the largest municipal bankruptcy filing in U.S. history. The city emerged from bankruptcy this past December, according to the Detroit Free Press.

"[Puerto Rico calls] for debt relief on such a vast scale [that it] could raise borrowing costs for other local governments as investors become more wary of lending," The New York Times noted.

"Perhaps more important, much of Puerto Rico's debt is widely held by individual investors on the United States mainland, in mutual funds or other investment accounts, and they may not be aware of it," the newspaper continued.

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Puerto Rico's debt "is not payable," the commonwealth's governor said this week as he called for new, sweeping concessions from island's creditors.
puerto rico, debt, not, payable, 72 billion
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2015-55-29
Monday, 29 Jun 2015 11:55 AM
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