Puerto Rico Gov. Alejandro García Padilla will deliver a major speech Monday night after releasing a report that paints a gloomy picture of the U.S. commonwealth’s finances. Padilla is expected to make a public plea to defer payments because San Juan is unable to pay its massive public debt of about $72 billion, the governor said in an interview with the New York Times on Sunday. Padilla also warned that the island is dangerously close to falling down a “death spiral.”
For years, economic contraction has gripped Puerto Rico. The U.S. territory also has endured government overspending, debt dependence, double-digit unemployment and high energy costs. San Juan has relied on the bond markets to cover its expenses, but now the commonwealth faces default if lenders don’t start talking about debt, structural reforms and institutional credibility.
“It is no secret that the Commonwealth has faced fiscal issues over the last decade,” Padilla said in a written statement Monday. “We must make difficult decisions to meet the challenges we now know are ahead, and I intend to do everything in my power to lead us through this time.”
Former World Bank chief economist and former deputy director of the International Monetary Fund Anne Krueger and economists Ranjit Teja and Andrew Wolfe analyzed the full extent of Puerto Rico’s fiscal situation and their findings along with recommendations for a five-year adjustment plan were released in a worrying report Monday.
“Puerto Rico faces hard times ... A crisis looms,” the report stated. “The situation is acute in the face of faltering economic activity, faltering fiscal and debt sustainability, and faltering policy credibility. A comprehensive program that tackles all three has a better chance of success than a partial approach, and the advantage of sharing the costs and benefits of reform across government, workers, businesses and creditors.”
Puerto Rico’s fiscal woes echoed those of Greece, where the government has closed its banks and imposed restrictions on cash withdrawals amid fears that the country was headed toward default. Padilla was expected to address the public Monday at 5 p.m. EST, which will be available via live stream below.