Puerto Rico has unveiled a proposal aimed at reducing the U.S. territory's debt by more than 60% in an effort to pull it out of bankruptcy.
A seven-member federal oversight board that oversees Puerto Rico's finances filed a plan of adjustment that would reduce $35 billion in liabilities to $12 billion. The percentage of tax payer funds being spent on debt payments would also be drastically reduced, moving from almost 30% to just under 9%.
Over the course of decades, Puerto Rico has accumulated billions of dollars in debt due to "financial mismanagement" and "corruption." In 2015, the territory declared the debt unpayable and about two years later, it filed for the biggest municipal bankruptcy in U.S. history.
In response to Puerto Rico's struggles, Congress created a new law, called PROMESA, that would create a process to restructure debt and essentially allowed the territory to seek bankruptcy protection. The Financial Oversight and Management Board was created as part of PROMESA.
The Chairman of the Oversight Board believes the new proposal represents a major step forward for Puerto Rico. He said: "Three years after Congress passed PROMESA and two years after the most severe Hurricane in more than 100 years hit Puerto Rico, after more than a decade of economic decline and fiscal disarray, after tens of thousands of Puerto Ricans left their island to find prosperity elsewhere, we have now reached a turning point."
According to Reuters, the federal judge who is hearing Puerto Rico's bankruptcy cases is expected to confirm the plan sometime in early 2020.