Puerto Rico debt plan calls for austerity, public spending cuts
Share Now on:
Puerto Rico’s financial oversight board was a central part of last year’s PROMESA bill, a law passed in the U.S. Congress that allowed the commonwealth to avoid defaulting on billions of dollars in bond payments for a time. The board’s revised plan, announced Monday, calls for austerity measures and big cuts in public spending.
The plan includes cuts to the University of Puerto Rico, a reduction in pension benefits and a $550 million reduction in the island’s annual health care budget. The health care cuts could carry large consequences, as more than half of the island’s population is on government-provided health care.
Hector Cordero-Guzman, a professor at City University of New York’s Baruch College, said Washington, D.C.’s consideration of the island in Congress and in the courts is as important as the plan itself.
- RELATED: Not even bankers can predict Puerto Rico’s fiscal future
- How a debt crisis is affecting San Juan, Puerto Rico
- Would a Puerto Rico default hurt all municipal bonds?
“If Puerto Rico is seen as a cost and a liability then the crisis will continue to spiral out of control and people will continue to leave,” he said.
Migration numbers to the mainland are among some of the highest in history with many Puerto Ricans settling in Florida and Texas.
Creditors have been told they will have to take a haircut on the more than $70 billion owed them by the Puerto Rican government. Maryellen Tighe, a journalist at Debtwire Municipals, said everyone involved with this recovery plan will feel the pinch.
Tighe said the next move will likely be negotiations in which the government will sit down at the table with creditors and hammer out the details.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?