The Financial Oversight and Management Board for Puerto Rico has certified new Fiscal Plans for the Commonwealth and the University of Puerto Rico by unanimous vote during a public meeting in San Juan
The New Fiscal Plan for the Commonwealth of Puerto Rico has been updated to reflect more reliable revenue and expenditure data for Fiscal 2018. This data includes improved population and healthcare spending projections, as well as updates to real growth.
The data also captures the recently-negotiated Sales Tax Financing Corp. (known as COFINA by its initials in Spanish) debt agreement.
“Federal disaster relief does not flow into the budget or into future surplus available for debt repayment; however, it does help stimulate the economy,” board member said.
“At some point, the pro-growth effect from the stimulus will end and that is why the Board urges the government of Puerto Rico to implement deep structural reforms to sustain growth over the long term,” it added.
Although the New Fiscal Plan projects a primary surplus through 2033, it also projects a primary deficit from 2034 through 2058 based on the unwinding of the federal disaster recovery fund stimulus effect and the lack of broader and deeper structural reforms.
The structural deficit starting in 2034 underscores the importance of implementing additional growth generating reforms to improve the business climate, attract new investments, create jobs in Puerto Rico, and change the underlying challenging economic and demographic trends in Puerto Rico.
Consequently, while this New Fiscal Plan includes many of the critical reforms needed to improve the Island’s fiscal balance and economic conditions, there are some important reforms, like labor reform, that are not included in this New Fiscal Plan “because the political will to adopt them does not exist at this time,” the Oversight Board’s Executive Director Natalie Jaresko said.
“The New Fiscal Plan for the Commonwealth details actions needed to create a brighter future for Puerto Rico,” said José Carrión, Chairman of the Oversight Board. “But even after implementing these structural reforms and fiscal measures, there is still much more to be done to put Puerto Rico on a long-term path to growth.”
“Unless more ambitious reforms are undertaken, Puerto Rico will not be able to overcome the problems that have plagued the Island for so long,” Carrión added.
As announced earlier, the New Fiscal Plan includes critical structural reforms and fiscal measures needed to achieve fiscal responsibility and regain access to the capital markets.
These include human capital and welfare reforms, energy and infrastructure reforms, ease of doing business reforms, as well as right-sizing government, pension reform, healthcare reform, and other efficiency measures.
The Board urged the government to “direct all agencies to accelerate work toward implementation and make timely progress.”
“Only full implementation of the New Fiscal Plan will allow Puerto Rico to meet the Puerto Rico Oversight, Management and Economic Stability Act’s objectives of achieving fiscal balance, and will help outline the way to regain access to the capital markets and restore economic opportunity for the island,” said Jaresko.
In addition to the revisions made to the Commonwealth Fiscal Plan, the Board also made technical changes to the UPR Fiscal Plan, which was also certified by unanimous vote.