Every two years, the United States Government Accountability Office releases a report of the debt of each US unincorporated territory. They do this because the American territories historically borrow a lot of money from financial markets, which has gotten bad enough that in 2015 Puerto Rico defaulted on their debt. The report is required to include three things; trends in public debt and data, trends in revenue and expenses, and risk factors that may affect each territory’s ability to repay public debt. The report aims to help both the territories and the federal government rein in unsustainable borrowing from the territories.
The information provided for Puerto Rico mostly includes what they are doing in response to their default back in 2015. In March of 2022, the Puerto Rican government came to an agreement with bondholders, which ultimately decreased their debt by 78%. The expectation is the debt will be paid off in 2049. In 2021 the government reported a surplus over expenditures. COVID-19 had a large impact on both revenue and spending, increasing both.
According to the GAO, Guam’s debt was 43% of its total GDP. Guam’s GDP decreased in recent years, which reflects the loss of income caused by a decrease in tourism. However, a third base opened on the island with the expectation that it would increase economic growth. Guam has struggled with several weaknesses in its financial reporting. For instance, the GAO said that Guam has an inadequate financial management information system.
US Virgin Islands
The US Virgin Islands reported a GDP of $4.2 billion, with an outstanding debt of $2.6 billion, which makes up 65% of the territories GDP. They refinanced back in March of 2022, which made their retirement pension more solvent. However, the government’s ability to access traditional capital markets is uncertain, leaving them without flexibility in the face of economic woes. The issues facing the US Virgin Islands were listed as “a shrinking population, dependence on the volatile tourism industry, and weak financial management practices.”
Northern Mariana Islands
The Northern Mariana Islands were reported to have a GDP of $938.8 million with a debt percentage of 12% or $114.1 million. The report indicated this was indicative of the islands’ inability to borrow from traditional financial sectors. TheiIslands are struggling to fund their pension plan, with an official even telling a GAO official they are still determining if or how the government will fulfill its obligations. Additionally, the islands have struggled due to declining tourism and their largest casino closing down. The GAO reported that the Northern Mariana Islands are at risk for a severe financial crisis.
American Samoa was reported to have a GDP of $710.8 million, with a debt percentage of 23%, or $162.2 million. The GAO points to recent borrowing and investment into infrastructure as a reason for that number. The pension plan is underfunded, with the government increasing contributions to extend its solvency. While the economy is reported as stable, it is reliant primarily on one company, Starkist Samoa Co., with the only other major employer on the islands being the government. The prospect for growth outside of those two areas is lacking. However, according to a letter written to the GAO, American Samoa is investing in broadband networks and hopes to develop a setting for IT work to increase work in that sector on the islands.
The GAO conducts their study because the territories listed above often built-up large amounts of debt. The goal of the GAO is to provide transparency in these territories and help begin to lower the debts they have already taken on. The GAO conducts its study every two years, meaning the next study will happen in 2025.