Espacios Abiertos said yesterday that the Oversight Board and the government must ask the court and creditors for a moratorium of at least one year on payments of the already restructured bonds, and also insist on an almost absolute cut in the debt paid with taxes and eliminate definitively the cuts in public spending adopted as part of the fiscal discipline process required by PROMESA.
The transparency organization's recommendation comes after analyzing the most recent version of the central government's fiscal plan, in which economic projections reviewed as a result of COVID-19 show that the government can not pay current obligations.
According to Cecille Blondet, executive director of Espacios Abiertos, in light of this new context, the government must devote the resources it has to the public health crisis and its effects, instead of separating funds to pay bondholders.
In a roundtable with journalists, Blondet and the organization's chief analyst, Daniel Santamaría, considered it was right for the government to admit the failure of the austerity measures it had previously wanted to implement.
However, Santamaría also indicated that this change is taking place in an election year, and in that sense, the government's pronouncement in the plan is tenuous.
For Blondet, instead of the government postponing spending cuts for two years, austerity measures should be eliminated once and for all as part of Puerto Rico's economic policy.
In the last two months, in Puerto Rico, we have seen extreme austerity, Blondet said, explaining that the effect of those policies is like closing the door to the economy as has happened since the beginning of the pandemic on the island.
Earlier this month, El Nuevo Día reported that the revised fiscal plan the government submitted to the Board suggested postponing, for at least two years, the austerity measures previously agreed with the federal entity and recognized that the impact of reforms such as agency consolidation would not leave the savings projected.
The new government proposal also suggests to the Board that the agreement signed between the General Obligations (GOs) and the Public Buildings Authority (PBA) is no longer feasible and therefore should be reviewed.
According to Santamaría, examining the government's numbers indicates that the economic effects of the uncertainty associated with COVID-19 would anticipate by almost a decade - that is, from fiscal year 2039 to 2030 - a deficit scenario in the public coffers.
Similarly, the economist explained that the latest figures on the government's fiscal position reveal that, since mid-March, revenues are already below projections. This would imply that the government could again face liquidity challenges in the near future, making it necessary to suspend payments to bondholders on both the debt of the Sales Tax Financing Corporation (Cofina) and the restructured debt of the Government Development Bank. Sales and Use Tax (SUT) collections alone are down 17 percent compared to the same period last year, Santamaría said.
Espacios Abiertos' analysis indicates that if before there were doubts about Puerto Rico's payment capacity, now the most optimistic scenario points out that public debt paid with taxes would have to be cut by 90 percent in order to be able to pay.