Hurricane-Torn Puerto Rico Says It Can’t Pay Any of Its Debts for 5 Years

Hurricane Maria made Puerto Rico’s already grave financial situation so much worse, the island’s leaders acknowledged late Wednesday, that they will not be able to pay down any portion of their more than $70 billion debt over the next five years.

Just before the hurricane, Puerto Rico had made plans to pay creditors a total of $3.6 billion through 2022. That was just a fraction of the amount due, had the island, a U.S. commonwealth, not gone into default.

Now, Puerto Rico expects its budget to be $2 billion to $3 billion in the red, Gov. Ricardo A. Rosselló told reporters at a briefing on Wednesday — a deficit that will take five years to shrink. By then, he said, the cumulative effect of tough economic austerity measures will help the island’s government achieve a balanced budget, as required by the federal oversight board that controls Puerto Rico’s troubled finances.

Puerto Rico submitted an updated fiscal plan to the board, including the five-year debt moratorium. An earlier draft had been approved, with certain exceptions, before Hurricanes Irma and Maria slammed into the Caribbean island in September. But that plan had to be reworked in light of Maria’s vast devastation, which prompted tens of thousands of Puerto Ricans to flee the island amid job layoffs and power blackouts. Nearly a third of customers remain without electricity, more than four months after the storm.

“We already had a recession in Puerto Rico,” Rosselló said. He added that the hurricane’s “social impact was significant, because of the exodus and population decrease we’ve had in Puerto Rico, and expect to have in the future.”

Before the hurricanes, Puerto Rico figured it would lose 0.2 percent of its population of 3.4 million every year over the next five years, as a result of a recession that has lasted more than a decade. Now, the government projects its population will shrink by 7.7 percent — nearly 262,000 people — in fiscal year 2018 alone, with the exodus slowing over the next four years.

The fiscal plan must now be approved by the oversight board, which has been at odds with Puerto Rican leaders over how to restore fiscal balance after years of spending more than they had, and borrowing to make up the difference. The board, for example, has insisted on reducing public employee pensions by 10 percent, on average, as a way to spread the economic suffering evenly among Puerto Ricans. Rosselló maintained on Wednesday that the pensioners are too “vulnerable” a population.

Puerto Rico declared a form of bankruptcy last May, giving the island a way to decide how much to cut pensions, debt payments and other obligations under federal court supervision. The federal oversight board will represent the Puerto Rican government in the proceedings — but first it must accept the governor’s fiscal plan. If it disagrees, it is empowered to impose its own fiscal plan on the island.

On Monday, Rosselló announced his intention to privatize the Puerto Rico Electric Power Authority, known as PREPA, saying it would make electricity cheaper and more reliable and attract more business to the island. Many Puerto Ricans blame PREPA, which is insolvent, and their government for their suffering during the long blackout. The utility hired a little-known contractor in Montana, Whitefish Energy Holdings, to handle repairs immediately after the storm, breaking with the usual procedure of allowing another utility to make repairs at cost after a natural disaster. PREPA was forced to cancel the contract after it came under intense federal scrutiny.

PREPA is so short on cash that it shut down two power plants on Tuesday night to save fuel. The government said people who had already gotten their power back would not be affected.

The federal government, however, has questioned whether Puerto Rico is as cash-poor as it says. On Jan. 9, the Treasury and the Federal Emergency Management Agency notified Puerto Rico it could not begin drawing on its share of a $4.9 billion disaster-relief loan approved by Congress because the commonwealth still has about $1.7 billion in cash available to spend on its own — as well as another $6.9 billion in cash “on deposit in over 800 accounts across all Commonwealth governmental entities.”

Last Friday, the oversight board asked Puerto Rican officials about the $6.9 billion, which was discovered in December. About $4.3 billion was said to be tied up in funding for other government agencies, even as the power, water and sewer utilities struggle to make ends meet.