Guam public debt up $2.6 billion

June 30, 2019

 

 

The government of Guam’s total public debt ticked past $2.6 billion as of 2017, leaving every Guam citizen in debt of $16,106.2, according to the Government Accountability Office’s public debt outlook for U.S. territories.

 

GAO noted that GovGuam’s borrowings were driven by the need to refinance existing debts—originally issued to comply with federal requirements and court orders— and to fund infrastructure projects.

 

“Since fiscal year 2015, the government of Guam and its component units have issued five bonds and entered into two federal loan agreements with the U.S. Department of Agriculture,” GAO said in the report released June 28.

 

Collectively, the amount of these five new bonds is about $190 million and the amount of refinanced debt is approximately $844 million, GAO said.

“According to officials, the government does not plan to issue debt for government operations moving forward, although it may continue to do so to refinance existing debt or fund infrastructure projects as needed,” the report said.

 

GovGuam’s 2017 public debt showed a slight increase from $2.5 billion in fiscal year 2015.

 

“Total public debt outstanding as a share of GDP remained fairly constant, increasing slightly from 44 to 45 percent between fiscal years 2015 and 2017,” GAO said in a report released June 28. “In fiscal year 2017, the majority of Guam’s public debt was owed by component units.”

 

Since its prior report last year, GAO opinion on Guam’s fiscal risks for repaying public debt remain largely unchanged.

Pension liabilities continue to pose a fiscal risk that may affect repayment of public debt, GAO said.

 

“Guam’s net pension liability for the primary government and components units was $1.2 billion, or 22 percent of GDP, in fiscal year 2015. In fiscal year 2017, Guam reported a net pension liability for the primary government and component units of more than $1.6 billion, or 28 percent of GDP in that year,” the report said.

 

“Territory officials told us they made several changes to the government retirement system that took effect Jan. 1, 2018, including increasing the contribution rate and creating a new defined benefit plan for existing employees.”

 

 

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GAO also found public debt risks in other territories during the period covered by the audit.

 

The CNMI has not issued any new debt since fiscal year 2007, and as such, public debt decreased from 16 to 8 percent of GDP between fiscal

years 2015 and 2017.

 

During this period, CNMI’s general revenue increased by 48 percent and it operated with a surplus. CNMI’s potential labor shortages due to federal restrictions on foreign workers have been mitigated.

 

“However, pension liabilities and future reductions in revenue from recent typhoons present fiscal risks that may affect repayment of public debt in the future,” GAO said.

 

Beyond the audit period, the CNMI’s fiscal condition has been in trouble due to a series of typhoons that hit the islands last year.

 

GAO’s findings for other U.S. territories are as follows:

 

Puerto Rico has finalized two out of six total debt restructuring agreements to date. Through this restructuring process, Puerto Rico’s bonds are replaced by bonds with new repayment terms. Public debt was 93 percent of gross national product in fiscal year 2016, the most recent fiscal year for which audited financial statements were available.

 

Puerto Rico’s capacity for debt repayment depends primarily on the outcomes of the ongoing debt restructuring process and its ability to generate sustained economic growth. While federal hurricane recovery grants are likely to stimulate the economy in the short term, it is unclear whether the resulting economic benefits will be sustainable.

 

The U.S. Virgin Islands has not been able to access capital markets at favorable interest rates since early 2017 and it has not issued any new bonds.

 

It has, however, received federal loans for hurricane recovery, which may contribute to its overall debt burden if they are not forgiven. Public debt decreased from 72 to 68 percent of GDP between fiscal years 2015 and 2016, the most recent year for which audited data were available.

 

While general revenue increased by 40 percent during this time period, longstanding deficits persisted. USVI’s continued ability to repay public debt depends primarily on whether it can access capital markets at favorable rates in the future, its ability to create economic growth, and its ability to address its pension liabilities and the pending insolvency of its public pension system.

 

American Samoa’s public debt increased from 13 to 19 percent of GDP between fiscal years 2015 and 2017. This increase was due largely to a single bond issued in early 2016 to fund various infrastructure projects. General revenue fluctuated during this period and the territory had a deficit in 2017.

 

The territory continues to face fiscal risks that may affect repayment of public debt, such as a reliance on the tuna canning and processing industry and significant pension liabilities.

 

 

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