According to the Puerto Rico representative before the Fiscal Supervision Board, Elías Sánchez Sifonte, the government - and therefore, Puerto Rico - is expecting
According to the Puerto Rico representative before the Fiscal Supervision Board, Elías Sánchez Sifonte, the government - and therefore, Puerto Rico - is expecting "a financial storm". (Gerald López Cepero)

Yesterday, the government acknowledged that in the next six months it will experience a chaotic financial situation and that, for that reason, they have resorted to non-recurring funds and will not pay the debt to the state insurers in order to strengthen the cash base of the Department of the Treasury.

According to the Puerto Rico representative before the Fiscal Supervision Board, Elías Sánchez Sifonte, the government - and therefore, Puerto Rico - is expecting  "a financial storm" as from next July and therefore they employed "emergency measures" that multiplied the cash estimates in the main account of the Treasury, known by the acronym TSA.

Sánchez Sifonte added that the situation is so serious that the reduction of the working day that the Board established as a contingency in March is still alive. But immediately, he stressed that the measures employed will avoid activating such cuts as from next July.

Fiscal Crisis Resurfaces

Sánchez Sifonte's statements about the fiscal crisis came about three days after a plebiscite was held, in which 97% of the few voters who went to the polls supported statehood.

Yesterday, the lawyer revived the magnitude of the fiscal crisis during a press conference at La Fortaleza, in which he offered details of the government's improvement in liquidity, a fact that became known this week, after the Center for Investigative Journalism (CPI, Spanish acronym) released the report of the Treasury TSA account up to May 26th.

The report was part of several documents La Fortaleza handed over to the CPI as a sequel to a litigation for access to information, which is still ongoing.

"The document delivered to the CPI is a projection of government liquidity, but not based on economic growth or because the economic situation of the government is improving dramatically," explained Sánchez Sifonte.

"These are a series of measures that the government has taken to prepare for situations of stringency or liquid impact that we are going to face in the next two quarters of fiscal year 2018”

The jugglery put into effect by Rosselló Nevares administration boosted the cash of the TSA account by about $ 859 million. The figure is achieved due to the non-payment of $ 423 million in Trans; an adjustment of $ 150 million in payments to suppliers and $ 46 million in funds subject to retention or “claw back” that will remain in the Treasury account under this year Law 5. In addition, the government recorded additional collections for $ 74 million to the General Fund, $ 90 million in non-recurring income, an additional $ 33 million in federal funds and a variance in miscellaneous of $ 43 million.

Up to May 26th, the Treasury TSA account had cash for $ 1,418 million versus the $ 564 million estimated in the fiscal plan approved by the Board last March.

Angry bonholders

El Nuevo Día asked why the government does not reveal its position and liquidity projections frequently.  Sánchez Sifonte answered that these reports are "working documents" with the Board and that the government has divulged figures in the public meetings of the federal agency.

He also said that bondholders have access to the government financial information in a virtual data room.

However, three executives related to bondholders groups assured separately that they didn´t know about the document.

"Rosselló administration did have resources to pay the interest (of the public debt)", said one of the executives who asked not to be identified.

The executive explained that although cash projections exclude debt service, cash estimates in the fiscal plan considered the impact of pension plans and the end of Medicaid funds for the Mi Salud program.

The positive numbers in the government's TSA account would be in red if debt service is added. This exceeds the $ 3 billion for the next fiscal year. El Nuevo Día asked Sánchez Sifonte how much the Treasury cash would fall if the so-called "fiscal cliff" were counted, but he indicated that he did not have the information available.

The claim in court

The so-called "fiscal cliff" is one of the reasons why, last May, Rosselló Nevares Administration asked the Board to invoke Title III protection.

Therefore, it would also be necessary for Judge Laura Taylor Swain to resolve as soon as possible the controversy between the bondholders of General Obligations and those of the Puerto Rico Urgent Interest Fund Corporation (COFINA). This was alleged by the Board in a motion that indicates that by next November, the government could take money from Cofina to cover operational expenses.

Yesterday, when asked what Cofina's collections would be needed for facing the new cash projections, Sánchez Sifonte indicated that he could not comment on matters that are under the consideration of the Court.

Suppliers and Refunds

What Sánchez Sifonte did say is that with all the precariousness that is looming, the government will not reduce payments to suppliers neither the refunds.

Meanwhile, he stated that Treasury continues analysing the  accounts payable in various agencies and that to date, there are about $ 373 million in payments to pending suppliers.

This item would be different from the excessive expenses believed the government is believed to have incurred between the fiscal years 2015 and 2016 and that forced the creation of a contingency of $ 590 million due to requirements of the Board and that has been contemplated for the following fiscal year.


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