The tropical island of Puerto Rico has recently defaulted following its failure to completely pay its debt of $58 million, which was due last Monday. According to a report by CNN Money, the largest U.S. territory only managed to pay $628,000.
Following the default, Government of Development Bank of Puerto Rico Melba Acosta Febo has told The New York Times, “This was a decision that reflects the serious concerns about the commonwealth’s liquidity.”
Just recently, Puerto Rico Treasury Secretary Juan Zaragoza Gómez has announced that the General Fund Revenues for fiscal year 2015 has gone down slightly by 0.8% to $8.961 billion. In 2014, the said revenues were about $76 million more.
In total, Puerto Rico’s debt amounts to approximately $70 billion. The amount due last Monday was said to be $483 million. Experts have said that Puerto Rico is likely to pay all of its $58 million debt, except the part that is due to the Public Finance Cooperation.
As of July 2015, financial services company, Moody’s has given the Commonwealth of Puerto Rico a Caa3 rating and a negative outlook. Meanwhile, another financial services company, Standard & Poor’s, has rated Puerto Rico with a CCC- or negative on CreditWatch, questioning the commonwealth’s ability to timely fund its debt service payments as early as September.
Interestingly, the island has the same amount of outstanding debt as the state of New York. However, the similarities end there as Puerto Rico’s economy is estimated to be worth just $69 billion, compared to the value of the economy of New York, which is $1.2 trillion.