February 13, 2018 / 10:59 PM / 2 years ago

Revised Puerto Rico fiscal plan taps federal budget money

NEW YORK (Reuters) - Puerto Rico Governor Ricardo Rossello released a revised fiscal plan on Tuesday that will use $18 billion of additional money from the U.S. federal budget to transform the bankrupt island’s deficit into a $3.4 billion surplus within six years.

FILE PHOTO: Puerto Rico Governor Ricardo Rossello speaks during an interview in New York City, U.S., November 2, 2017. REUTERS/Brendan McDermid/File Photo

The injection of new funding from the federal budget, enacted earlier this month, will let the U.S. territory shift its recovery plan again and make changes requested by its federally appointed financial oversight board.

The new blueprint came after Hurricanes Irma and Maria devastated Puerto Rico in September and altered its economic outlook.

Before the storms, the recovery plan had projected a nearly $4 billion surplus through 2021. But after the hurricanes, the government forecast a $3.4 billion gap for the same period that would not allow any repayment of the island’s debt.

Now, the island’s budgetary health would rise again to a projected $3.4 billion surplus by 2023 under the new estimates, as the destruction is also bringing disaster aid.

Altogether, the revised plan incorporates $21 billion of private insurance proceeds and assumes $49.1 billion of disaster aid from the federal government.

Puerto Rico is struggling to recover from Hurricane Maria - its worst storm in 90 years - while also navigating the biggest government bankruptcy in U.S. history, with $120 billion in combined bond and pension debt.

The island is also expected to lose another 20 percent of its population over the six-year period, the revised plan said.

Puerto Rico’s financial oversight board told Rossello earlier this month to create room in the budget for an emergency fund and to add more detail on labor and other reforms.

The revised fiscal plan creates an annual reserve of $130 million and a $400 million investment for infrastructure maintenance and development.

The board is expected to evaluate Rossello’s revised plan in the coming weeks and, after a public hearing, determine whether to certify it.

Separately on Monday, the oversight board appointed Citigroup Global Markets Inc as lead investment banking advisers for the restructuring and privatization of the Puerto Rico Electric Power Authority, or PREPA, its electric utility.

Reporting by Hilary Russ; Editing by Daniel Bases and Jonathan Oatis

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