The revised Fiscal Plan recently submitted by the Puerto Rican government is based, once again, in assumptions that appear uncertain and jeopardize the successful execution of the plan towards finances recovery and the island´s economic development.
Two of the fiscal document premises cause serious concern: certainty about the government transformation and excessive confidence in the prompt disbursement of federal funds for the restoration after the emergency, recently assigned by the United States government.
The government assumes that both projections will be materialized in the projected dates and that these will be translated into the savings budgeted in the revised Fiscal Plan. The weakness of these important assumptions undermines the opportunities of the execution of the fiscal map that the Oversight Board has to certify this month.
Let's see why.
Legislative rejection to the government´s ambitious reengineering projects is a sign of the obstacles that the Executive faces in an effort to provide cost-effectiveness to the high, bureaucratic and onerous central government. Therefore, the Executive must not present as a guaranteed fact the variable of government reorganization.
Such process, which would lead to the most comprehensive reforms in the island's history, could vanish as the election period approaches, when the political forces abandon the really urgent goals for the island.
It is also necessary to warn about the exacerbated optimism of the government about the disbursement of emergency federal funds. These include those linked to the power grid restoration and to avoid the healthcare system collapse, two core areas that require deep reforms.
We can not be dazzled by these figures without following the path designed by Congress for their disbursement. We must remember that the new federal law for these allocations requires to comply with transparency and accountability requirements so that funds can be disbursed.
In addition, the bill grants the Board, as Puerto Rico´s fiscal entity, the authority to ensure that adequate processes mediate in the distribution of these funds. In that sense, it is not wise to ignore the level of control of the Board over these funds and the conditioned local access to the money.
Presenting assumptions, that depend on factors that are beyond the Puerto Rican government control, as certain weakens the Fiscal Plan. Hence, questions arise whether a surplus budget and the magnitude indicated by the local government can really materialize. Uncertainty also extends to the island recovery viability. This is tied to everybody´s aspiration and we have no doubts that Governor Ricardo Rosselló tries to include it in his fiscal proposal, the priority of having a strengthened Puerto Rico.
In any case, should the anticipated surplus in the new fiscal proposal be produced, it would be necessary to determine the portion that would be reserved to meet theobligations with the creditors in a reasonable period. It is important to stress that Puerto Rico´s recovery and economic development are linked to its return to the capital markets. Unfortunately, the recently submitted Fiscal Plan appears shy in its intention to place the island in a position to recover the confidence of the markets.
Uncertainty in the Fiscal Plan has consequences on the hope of its execution and, therefore, on the certainty of reconstruction.
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