Search Google

7/31/15

Hedge fund snake oil for Puerto Rico

The prospects for an early resolution to Puerto Rico’s debt crisis do not appear to be good. For judging by this week’s report commissioned by hedge fund owners of Puerto Rican bonds, the hedge funds seem to be arguing that Puerto Rico does not have a government debt problem. Indeed, they appear to be arguing that all that Puerto Rico needs to do is to fully implement the budget austerity and structural reform measures suggested by the recent Krueger report (commissioned by the Puerto Rican government) and all would be well on the island.

The hedge fund report, commissioned from a group of former International Monetary Fund (IMF) economists and entitled with the misnomer “For Puerto Rico, There is a Better Way,” is seriously flawed. It bases its conclusions on its idiosyncratic interpretation of the Krueger report. It does so by asserting that if that report’s recommendations of severe budget austerity and structural reform were fully implemented, Puerto Rico’s government deficit problem would disappear and its government debt problem would be resolved.

Yet somehow the hedge fund report overlooks the fact that the Krueger report found that even if all of its recommendations would be strictly implemented, Puerto Rico’s government would still have a very large unfunded financing gap. Indeed, the Krueger report estimated that over the next 10 years, even if all of its recommendations were to be implemented to the letter, Puerto Rico’s financing gap would amount to around 30 percent of the government’s debt servicing obligations. That finding led the Krueger report to explicitly state that debt restructuring would have to be part of the solution to the island’s government debt problem.

Full text of this article can be found at TheHill.com.



from AEI » Latest Content http://ift.tt/1Iy73qY

0 التعليقات:

Post a Comment

Search Google

Blog Archive