By Matt ZwolinskiAUGUSTA, Ga.
(AP) The island’s largest banks are on the verge of defaulting on loans, as a growing wave of bankruptcies and bankruptcies in the island’s financial sector is hitting the island hard.
In a letter to Congress, Puerto Rico Gov.
Ricardo Rosselló said the island needs to declare bankruptcy as soon as possible if the economy is to recover.
The island has lost nearly half its banking sector since January as companies and individuals defaulted on their debts.
Rosselló cited a study from the International Monetary Fund that found Puerto Rico could be the hardest-hit state in the United States in terms of financial distress.
The IMF said Puerto Rico is already the fourth most indebted state in terms to GDP in the world.
In March, the island of 1.4 million people declared bankruptcy and cut its capital gains tax to 1 percent.
The governor has called for the state to start paying creditors.
The Puerto Rico General Assembly on Wednesday approved a bill to extend the debt-service agreement until at least the end of 2020.
The legislation, which passed by a 5-4 vote, gives the island the right to begin paying back debts that are already in place.
Rosseló has been calling for the debt relief, which would include $3 billion in tax credits and the possibility of repaying loans.
The debt-servicing agreement is only the latest in a string of economic problems in Puerto Rico.
The economy contracted in May and June, according to the latest figures from the Puerto Rico Department of Finance.
It contracted again in September, and was down 5 percent in October.
The government’s economic outlook for the rest of the year is negative.
In the first quarter of 2019, Puerto Ricans had the third-lowest unemployment rate in the country behind Texas and Florida, according the Puerto Rican Labor Department.
The unemployment rate is below the national average of 7.4 percent.