SAN JUAN, Puerto Rico, Dec. 31 (UPI) -- Puerto Rico, struggling with $73 billion in debt, will use cash reserves to pay the majority of bond payments due in January, the governor announced.
Gov. Alejandro Garcia Padilla said the U.S. island territory will use some funds reserved for other debts to escape default on all but $37.3 million of more than $1 billion due creditors Monday.
"The use of over $100 million in reserved funds to make debt service payments for several of the commonwealth's issuers should underscore that the commonwealth is running out of options to pay its debt," said Melba Acosta Febo of Puerto Rico's Government Development Bank said in a statement.
Puerto Rico's economy has been in decline since 2006 when a tax break, favorable to manufacturers willing to set up facilities on the island, was phased out. Unemployment has been in double digits and the economy has prompted the largest migration of Puerto Rican residents to the U.S. mainland since the 1950s. Sale of Puerto Rican bonds, exempt from federal, state or local taxes, perpetuated a cycle of deficits and borrowing to the point Garcia Padilla said in June the island's $73 debt is "unpayable."
The island government missed a bond payment in August, and Garcia Padilla seeks Congressional approval to proceed with Chapter 9 bankruptcy, similar to a financial maneuver used by Detroit and other U.S. municipalities but denied Puerto Rico, to restructure the debt. While the Obama administration supports bankruptcy protection, Republicans in Congress have generally opposed it; they compare it to a bailout, although no government money would be lost or spent.
House Speaker Paul Ryan, R-Wis., has said action could be taken by Congress in the first quarter of 2016. Another payment of $200 million is due in February, with a larger payment scheduled for May.
A U.S. Treasury Department spokesman said Puerto Rico is now "shifting funds from one creditor to pay another."
