Puerto Rico to be hit with painful austerity measures
The newly appointed head of a federal control board that oversees Puerto Rico's finances warned on Tuesday that the United States territory will be hit with painful austerity measures in upcoming months.
Interim Director Ramon Ruiz said there are no other options, given the island's dire economic situation, and recommended that the government act quickly.
"We allowed this to reach too critical of a point," he said. "Everyone will be impacted by the decisions that will be made."
Governor Ricardo Rossello has until next Tuesday to submit a revised fiscal plan that will outline where the cuts will be made and what essential services will be affected.
Some government officials have baulked at measures suggested by the board, which include slashing US$300 million from the public university's budget and cutting 10 per cent from a public retirement system that is expected to run out of money within a year. Last week, nearly a dozen top university officials resigned in protest of the looming cuts, and tens of thousands of retired government workers fear for their financial future.
Ruiz said the local government is cooperating with the board, but warned that if it doesn't submit a fiscal plan with cuts needed to address an anticipated US$7-billion deficit, the board will implement its own plan.
"We have to take control of the situation that exists," he said. "A lot of people, especially those who are most vulnerable, will be affected if we don't act immediately."
Ruiz also said it's unlikely the board will extend a May 1 deadline that currently shields Puerto Rico from creditor lawsuits because it would not be fair to bondholders.
His comments come just days after a federal judge said he will hear arguments from bondholder groups opposed to a debt moratorium imposed by the island's previous governor. The ruling was a blow to the government of the US territory, which is seeking to keep negotiations alive with creditors and restructure nearly US$70 billion in public debt amid a string of multimillion-dollar defaults.
Ruiz declined to comment on the judge's ruling because he said it was not final and could still be appealed.
In addition to submitting a fiscal plan, the governor has approved several measures aimed at cutting costs, promoting economic development and stabilising the economy.
Overall, more than 200,000 Puerto Ricans have left the island in recent years, and many fear the exodus will worsen as new austerity measures are implemented.
Ruiz said the board is not responsible for the consequences of those measures because it's up to the local government to decide what services might be affected.
"They have to be fiscally balanced within two years," he said. "How they do that is their responsibility."