The five permanently inhabited U.S. territories must address concerns about debt, financial accountability and economic growth, according to a new report.
The U.S. Government Accountability Office found the five U.S. territories — Puerto Rico, Guam, U.S. Virgin Islands, Commonwealth of the Northern Mariana Islands, and American Samoa — face financial challenges after the COVID-19 pandemic on top of existing problems such as high import and energy costs, population loss and limited industry.
“The territories have long-standing financial accountability problems, including the late submission of annual audited financial statements, the inability to achieve unmodified audit opinions on the financial statements, and numerous material weaknesses in internal control over financial reporting,” according to the U.S. Government Accountability Office report.
Puerto Rico’s gross domestic product was $106.5 billion as of June 30, 2021. In March 2022, Puerto Rico finalized its largest debt restructuring plan by issuing $7.4 billion in new bonds replacing $34.3 billion in outstanding bonds (a 78% reduction). The restructuring contained initiatives to change Puerto Rico’s struggling pension system.
“Finalizing the overhaul of electric and power operations and adhering to fiscal and financial management reforms are critical to sustained economic growth,” according to a summary of the report.
Guam’s total public debt outstanding was almost $2.6 billion, or about 43% of its $6.1 billion gross domestic product. Guam’s inflation-adjusted GDP declined by almost 2% annually from fiscal year 2016 to 2021, according to the report.
United States Virgin Islands gross domestic product was $4.2 billion in fiscal year 2020. As of September 30, 2019 — the last year for which United States Virgin Islands reported data — public debt outstanding was more than $2.6 billion, or about 65% of gross domestic product in that year. In March 2022, the USVI refinanced bonds to fund its pension system to temporarily extended pension solvency.
“However, the USVI government’s ability to access traditional capital markets is uncertain. This leaves it without financing flexibility as it faces serious economic, financial, and demographic challenges,” according to the summary. “These include a shrinking population, dependence on the volatile tourism industry, and weak financial management practices.”
The Commonwealth of the Northern Mariana Islands total public debt outstanding was about $114.1 million, or about 12% of its $938.8 million gross domestic product as of Sept. 30, 2020. This reflects the commonwealth’s inability to borrow through capital markets, according to the report.
“CNMI has struggled to finance its pension plan. CNMI officials told GAO they are uncertain how the government will meet its financial obligations. Moreover, its economy continues to decline with limited prospects for recovery as its tourism industry struggles and its largest casino is closed and unlikely to reopen soon,” according to the summary. “CNMI’s financial management and reporting has also worsened. With CNMI’s limited financial prospects and weak financial management practices persisting, CNMI is at risk of a severe fiscal crisis.”
American Samoa’s total debt outstanding was $162.2 million, or about 23% of its $710.8 million gross domestic product as of Sept. 30, 2021.
“This reflects recent borrowing to invest in its infrastructure. The government’s pension plan is underfunded and the government is increasing contributions to extend solvency. American Samoa’s economy is stable but continues to depend almost entirely on activity generated by the Starkist Samoa Co. tuna cannery and government employment,” according to the summary. “Prospects for economic growth outside of these areas face challenges.”
