US Treasury makes forceful call on Puerto Rico debt plan, seeks Congress support
The measures by Barack Obama-led US government to keep more pressure on lawmakers to bring Puerto Rico out of the economy crisis are facing strong resistance from Republicans. The US Treasury has listed out proposals, for which it sought the support of Congress to enact them to help the US territory Puerto Rico Island in dealing with the ongoing financial crisis.
Puerto Rico is struggling to get $72-billion debt support to reform the economy. Alejandro Garcia Padilla, Governor of Puerto Rico expressed concerns over debt burden of the Island as it will run out of cash by next June.
Republican-controlled Congress support is very important for Obama government in helping the ailing Island in healthcare funding, tax and bankruptcy legislation. Without bipartisan support from Congress, the US Treasury can't implement its proposed measures for helping the Island in implementing bailout package. In Island also, Governor Padilla is facing stiff resistance from other political parties in the implementation of economic reforms.
The Caribbean Island Puerto Rico is suffering from debt burden as 45 percent of the population is living below poverty line. The Island population is about 3.5 million. Anibal Acevedo Vila, former Puerto Rico Governor, said: "We need to bring the US government to the table. There's no way we can get out of this crisis if they don't come to the table. We're not begging for a help but they have a responsibility also."
Bondholders are not agreeing for lowering the principal amount of debt and interest. Some Democratic lawmakers had discussions with Puerto Rico representatives in Orlando, Florida. They have decided to seek Obama government's help in providing aid and other support to the Island.
The latest proposal by Obama government is beyond legislation, that's been already passed by the Congress. This will allow for restructuring debt issued by municipal bodies. This wouldn't involve the obligation of the commonwealth itself. Democrats have also supported the existing legislation. However, the latest proposal envisages making a new restructuring regime by allowing the Island government access to c court-administered restructuring process.
US Treasury Secretary Jack Lew and counselor Antonio Weiss had participated in the meeting with the representatives from the Island. Weiss will bring it forward to the US Senate Committee on Energy and Natural Resources.
The Island government has defaulted some parts of the debt earlier. The current cash balance is expected to last for few months only. Despite its emergency liquidity, it may not sustain till next year, observed economists. Puerto Rico will have to face bankruptcy and harmful consequences for the public, said US Treasury in a statement.
There are few prospects for the bill to extend bankruptcy protections to Puerto Rico by extending the option of filing under Chapter 9 of the bankruptcy code. The Island doesn't have access to Chapter 9 pertaining to municipal insolvencies. It seems that more exercise in a form of policy measures and other support are required for improving the island's federal healthcare funding.