Puerto Rico's Governor Alejandro Garcia Padilla is presenting to the public on Monday proposed solutions to the U.S. territory's mounting $72 billion public debt that he admitted could not be paid.
The proposals include exchanging old bonds for new ones with later or lower debt payments and changing the U.S. bankruptcy law to extend coverage to the territory, according to a report of former International Monetary Fund (IMF) and World Bank economists commissioned by the Government Development Bank (GDB) in February to analyze the island's economic and financial stability and growth prospects, The New York Times reported.
The report also proposes introducing sales tax and surcharge on corporate income tax, raising property tax, suspending the minimum wage, cutting the number of workers' holidays, cutting welfare and housing, and cutting spending by gradually retrenching teachers, reducing subsidy to the University of Puerto Rico and reducing Medicaid expenses in excess of the U.S. mainland, according to CNBC.
The report is being revealed as Padilla concedes that the government cannot pay its debt.
"The debt is not payable," Padilla said, according to the Sunday issue of The New York Times. "There is no other option. I would love to have an easier option. This is not politics, this is math."
Padilla said creditors have to negotiate for a debt restructuring.
"What will happen is that our economy will get into a worse situation and we'll have less money to pay them," he said if creditors do otherwise, according to The New York Times.
"We have to recognize we have a very serious problem with the fiscal situation of the island," Puerto Rico House Speaker Jaime Perello told reporters on Sunday, according to Reuters.
The island's electric power authority, PREPA, has a $416 million payment due to creditors on Wednesday. Officials and creditors are negotiating to avoid a default.
The government's Public Finance Corporation, which has issued bonds to finance budget deficits in the past, has a July 15 deadline to pay $94 million to creditors.
The GDB, Puerto Rico's fiscal agent must repay $140 million of bond principal by Aug. 1.
