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Govt. out of cash.

GOVT. OUT OF CASH. The Commonwealth Government will run out of cash in the next few months. With expenses in the range of US$10 billion and projected revenue of US$8.8 billion, Puerto Rico will not be able to close fiscal 2006 without significant deficit borrowing, reports Caribbean Business (March 8, 2006):

Such a wide structural imbalance--or shortfall between recurring operating revenue and current expenses--has created a catch-22 situation for government of Puerto Rico officials. The central government expenses will surpass projected revenue receipts for fiscal 2006 sometime in May, leaving a one to two month period in the fiscal year where government would not have the money to cover its current expenses. That means the government may very well have to face the dilemma of either paying the payroll of more than 200,000 government employees or comply with the constitutional mandate of depositing the required amount in the Redemption Fund out of which the local government pays outstanding government debt;

Alternatives are limited and painful. Treasury could delay reimbursement of taxes and/or payment to government vendors, as it has done before. A loan from the GDB or another form of borrowing could yet again cover the budget deficit. A loan from the GDB without clear repayment sources would trigger another downgrade of the Commonwealth's credit, already just a step away from junk bond status.
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Title Annotation:PUERTO RICO
Publication:Caribbean Update
Article Type:Brief article
Geographic Code:1U0PR
Date:Apr 1, 2006
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