Krueger report: the true deficit is much larger and debt is unsustainable without growth

On June 29, 2015, Anne O. Krueger, Ranjit Teja and Andrew Wolfe published Puerto Rico – A Way Forward (updated July 13, 2015). The PDF in the OGP Virtual Library is the primary report, not a press note: it analyzes stagnation, emigration and debt, and concludes that markets cut the Commonwealth’s normal financing access.

The most-cited fiscal finding: the true fiscal deficit is much larger than the General Fund budget assumes. The report builds an IMF-style measure that folds in non-GF funds, component units, GDB and debt- or cash-financing. In FY2013–FY2014 the overall deficit averaged about 5% of GNP; under current policies, deficits on the order of $2½ billion a year (~3½% of GNP) and financing gaps of $3½–7½ billion annually year toward FY2025 if risks (federal health, Act 154) are added.

For FY2015, the report warns that a primary surplus of about $0.75 billion does not cover interest and amortization of about $2.75 billion, with deteriorating cash balances and rising payables. Central government and public enterprise debt sits near 100% of GNP at end-FY2014. Projected collections have exceeded actual take by about $1.5 billion a year (~15% of projections).

Among economic origins it cites the end of Section 936, the investment/housing bust (~10 points of GNP), higher oil prices and population contraction toward about 3.5 million. Among fiscal ones: inflated revenue projections, rigid spending and General Fund accounting that understates the challenge.

The proposed strategy is an integrated package: structural reforms (labor costs, electricity, Jones Act, ease of doing business), fiscal adjustment plus voluntary debt restructuring, and institutional credibility (multi-year plan, deficit rules, fiscal oversight board, timely data). The report is not a disbursement or “theft”: it is a diagnosis and roadmap. Primary: OGP KR-2015-7. Cousin: none (≠ same-day ENDI island press).