The chief of staff to Puerto Rico's governor said that the exchange of Government Development Bank notes is the most likely approach to the government's liquidity crunch.
The government believes to get through the fiscal year without running out of money it needs an additional $400 million to $500 million beyond the money it has and the money it is anticipating, Víctor Suárez Meléndez said Monday. A professional in the governor's office related the comments to The Bond Buyer Tuesday.
Suárez Meléndez said that without additional financial measures the government anticipated running out of money in November.
The government is exploring other options besides the notes exchange that would not require restructuring of debt, Suárez Meléndez said. However, the exchange is the leading option currently.
Gov. Alejandro García Padilla said in late June that the commonwealth's debt was unpayable at the commonwealth economy's current lack of growth. He said the commonwealth would ask for a moratorium on some of its debt payments.
While GDB president Melba Acosta Febo has called for a consensual restructuring of Puerto Rico's debt, it remains to be seen if GDB note holders will voluntarily accept the exchange of their notes for others with differing terms.
Suárez Meléndez also said the GDB's net liquidity had gone up in recent weeks. As of May 31 the bank had a net liquidity of $778 million.
In late June García Padilla set up a Fiscal and Economic Recovery Group to determine, among other things, means of reducing government spending and increasing government revenues.
The group is supposed to deliver its report on Sept. 1.
In the following weeks the legislature is expected to approve at least some of these measures. These steps will reduce the government's liquidity shortfall, Suárez Meléndez said.
