SAN JUAN – The Puerto Rican government says it cannot pay $2 billion in debt that comes due on July 1, meaning that it must trust that Washington will approve the law preventing its creditors from filing more lawsuits against it prior to that date.
“We don’t have all of what we need to pay. OK, perhaps it won’t be there, but we would have to close many public agencies, lay off public employees and cut services, and that’s not going to happen,” said Melba Acosta, the president of the Development Bank of Puerto Rico, the financial arm of the island’s government, on Monday.
Acosta was the first speaker at a meeting with the Bonitas del Patio association representing the 60,000 Puerto Ricans who hold the island’s bonds.
The group is meeting for the first time in San Juan to learn how the island government’s planned U.S.-backed debt restructuring will affect them, with Washington close to approving the so-called “Promesa” bill that would provide a legal framework whereby the U.S. commonwealth may declare bankruptcy to prevent lawsuits by its creditors.
Along the lines defended by the San Juan government in recent weeks, Acosta insisted on Monday that the U.S. Senate must urgently approve the Promesa bill before July 1, when some $2 billion in new portions of debt come due.
That debt includes $700 million in General Obligation bonds, payment of which is prioritized by the island’s constitution above any other public expenditures, including basic public services, which the government says it is not ready to relinquish.
Acosta said in remarks to EFE that the government can try to pay the interest on the debt, particularly on the GO’s, a figure exceeding $300 million.
“Promesa provides us with a halt to the lawsuits, an enormous help while the debt is restructured because that will help us avoid being in the courts spending even more resources,” she said after insisting that the approval of the project, in any case, “will not change the island’s fiscal – only its legal – reality.”
While the Senate is debating the bill, Acosta continues to head the talks with creditors, who are being asked to accept a five-year moratorium on the repayment of principle, although interest will still be paid, with the aim of giving the government “oxygen” to reinvest in economic rejuvenation.