Puerto Rico's government will likely have to cut back on public services or default on debts before the end of the year because it is running out of cash, the Government Development Bank said in a financial filing.
Putting numbers to a warning this summer from Gov. Alejandro Garcia Padilla, the filing late Friday said the U.S. territory had a $370 million overdraft as of Sept. 30 and burned through a $400 million emergency loan from a group of public corporations to keep government operating. It also cut revenue estimates for the current fiscal year by $355 million because of weaker than expected collections.
The development bank, which has been the lender of last resort for the island's cash-strapped government, may be insolvent by year's end, the report added.
To conserve cash, officials have been holding back payments to suppliers and tax rebates to taxpayers and they are now discussing cutting employee work schedules by two days a week. They have warned that maintaining essential services in the areas of health, education and public safety may force them to institute a debt payment moratorium.
The island is struggling to get out of a nearly decade-long slump that has reduced government revenues and spurred a growing exodus of islanders to the U.S. mainland to look for work.
Public Affairs Secretary Jesus Manuel Ortiz said at a Friday news conference that there would not be any government shutdown in November, but he acknowledged that one may be necessary in December.
"We are aware that a possible government shutdown could affect the economy. We are doing all that is possible so that in December we won't have to use a measure like that," he said.
The governor announced in June that Puerto Rico's nearly $72 billion in public debt was "not payable" and said its agencies would seek concessions from creditors. Puerto Rico's Electric Power Authority announced this week a restructuring agreement with holders of its bonds, who are owed more than $8 billion.
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