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Puerto Rico fiscal board faces scrutiny over revised deficit projections

Contrary to its initial projections, the Financial Oversight and Management Board for Puerto Rico “advanced the deficit projections” to possibly occur as early as 2027. This comes despite the expected benefits from fiscal measures and structural reforms imposed on the local government, “without providing a clear route on how it arrived at that negative outlook in its 2023 certified fiscal plan,” as per an analysis by Espacios Abiertos, a nonprofit organization focused to government transparency.

“In its fiscal plan last year (2022), the board projected that the deficit would occur by 2044, that is, in two decades,” said Espacios Abiertos’ research director and senior public policy analyst, Daniel Santamaría-Ots. “Now, a year later, and after approving the agreement with bondholders, the board, in its new plan, advances the deficit for 2027. Moreover, the scenario presented by the board of a deficit in 2028 is concerning, even if Congress approves annual Medicaid funding equivalent to the average granted to Puerto Rico between 2011 and 2022.”

The research director further noted that by “rectifying its previous position” and progressing the deficit to only four years after signing the agreement with bondholders, the board appears to be accepting that it promoted and committed Puerto Rico to payments under an optimistic scenario of supposed revenues. These revenues do not depend on the “will or action of the people of Puerto Rico” and have not materialized, as is the case with the renewal of federal Medicaid funding.

“Where is the data that supports that projection? What did the board discover that they are not telling us?” the analyst questioned. “What are the models used for this new deficit projection?”

In a statement, Santamaría-Ots urged the board to measure the impact on savings of the structural reforms already implemented in its certified fiscal plans. He asked that the panel “be clear with the people of Puerto Rico about whether the projections they made with their reforms already adopted by the government are materializing or not, and to what extent they will reach.”

“Clear accounts should be the norm for something as transcendental as what the board is projecting in its 2023 fiscal plan,” the economist said while presenting the analysis and his findings during a roundtable with reporters at Espacios Abiertos headquarters in the Luis Muñoz Marín Foundation in San Juan.

Santamaría-Ots further questioned where the savings and growth metrics projected by the board were “when they negotiated with bondholders and convinced the government to support a plan” based on numbers and measures that are not mentioned now or appear in the latest fiscal plan.

He also said the board failed to provide the foundation for its negative projections or clarify why the anticipated savings did not materialize and what the outcomes of the adopted austerity measures are.

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This story was written by our staff based on a press release.

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