Puerto Rico’s pension plan overhaul and Gov. Alejandro García Padilla’s proposal to increase sales tax revenues are both credit positive, Moody’s Investors Services said.

Moody’s maintained its Baa3 general obligation rating with a negative outlook on the commonwealth, the rating agency said in a report released Wednesday.

In the last six months all three rating agencies have dropped Puerto Rico’s GO rating to just above speculative grades. Among other things they have pointed to high debt levels, continuing budget operating deficits, and a weak economy.

The government currently has about $10.6 billion in outstanding GO debt. Overall Puerto Rico government debt, including semi-autonomous authorities and the autonomous COFINA sales tax bonds, is about $59.9 billion, according to Janney Capital Markets and the Government Development Bank of Puerto Rico.

On April 4 Puerto Rico passed a pension reform to eliminate the government’s primary retirement system’s cash-flow deficit. “The reform is a positive for the commonwealth, which faced rapidly approaching illiquidity of the retirement system,” wrote Moody’s spokesman David Jacobson in summarizing the Moody’s report.

In late April García Padilla proposed a budget that included a 191% increase in sales-and-use tax revenue through the widening of its applicability. “If the sales tax expansion passes it will be positive for both the commonwealth and the Puerto Rico Sales Tax Financing Authority (COFINA),” Jacobson wrote.

Yet most of the factors that led Moody’s to downgrade Puerto Rico in December remain, the Moody’s analysts wrote. “It will be politically challenging to pass all the measures in the budget, and the commonwealth’s reliance on the Government Development Bank of Puerto Rico (Baa3/negative outlook) for liquidity places additional risks on Puerto Rico’s public entities,” Jacobson wrote.

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