Puerto Rico, already dealing with a financial disaster, is about to be hit with anatural one.

Hurricane Irma is barreling toward the U.S. territory of 3.5million residents, raising the prospect of costly damage to apoverty-wracked island that collapsed into a record-settingbankruptcy in May. The storm is expected to pass near or just northof Puerto Rico later Wednesday.

The head of Puerto Rico’s electric company warned some areascould face electricity outages for months. And a devastating blowcould accelerate the dramatic population loss that’s driven PuertoRico’s long economic contraction, said Matt Fabian, a partnerwith Municipal Market Analytics.

“After 10 years of a recession, the island is not at allprepared for a disaster like Irma,” Fabian said. “And Irma maypermanently shrink Puerto Rico and push the island even deeper intopoverty.”

The storm, with winds of as much as 185 miles (300 kilometers)per hour, is set to pummel Puerto Rico less than two weeks afterHurricane Harvey led to the devastating flooding of Houston. Withthe Federal Emergency Management Agency at risk of running out ofcash this week, the U.S. House of Representatives on Wednesdayapproved spending $7.4 billion to replenish its relief fund.

Puerto Rico has little ability to cope with a disaster on itsown. Its finances are already being overseen by a federal board,and the central government filed for bankruptcy protection in Mayafter years of borrowing pushed it to the brink. Its electriccompany, struggling to modernize, followed suit. Puerto Rico’semergency fund has about $35 million, even with a $15 millionincrease in the most recent budget, Governor Ricardo Rossello saidthis week.

President Donald Trump Tuesday approved Rossello’s emergencydeclaration for the island. The U.S. board that’s overseeing PuertoRico’s finances has reached out to federal officials to accelerateloans and grants.

Puerto Rico bonds edged lower as the hurricane made its waythrough the Caribbean. General obligations maturing in 2035 changedhands Wednesday at an average 56.8 cents on the dollar, down fromabout 57 cents the day before, data compiled by Bloomberg show.Puerto Rico has already defaulted on the securities, leavingcreditors facing months of wrangling in court over how much they’llbe paid.

Prone to Disruptions

The head of the Puerto Rico Electric Power Authority, theisland’s government-run power utility, warned of potentialblackouts and reduced service for four to six months for some partsof the island. The agency’s median plant age is 44 years, comparedwith an industry average of 18 years, leaving it already prone todisruptions.

“Assuming the storm hits as is being forecast, some areas willhave service back within a week," Ricardo Ramos, Prepa’s chiefexecutive officer, said in a radio interview. “But for the entiresystem to be restored we’re talking about four to six months.”

There’s also the risk that those displaced by the storm won’treturn. Puerto Rico has lost more than 400,000 residents since2000, as people move to the U.S. mainland to look for work. The 9.8percent unemployment rate is more than double the national averageand about half of its citizens live in poverty.

The neighboring U.S. Virgin Islands, which is alreadycontending with strains similar to those that led to Puerto Rico’sunraveling, is also in the storm’s path. If dire enough, Irma couldlead that territory to also petition Congress for the right to filefor bankruptcy, Fabian said. The island has about $2 billion intax-supported debt, which has been cut deeply into junk gradebecause of the risk of a default.

“This could absolutely be the catalyst for the Virgin Islands todefault,” Fabian said. “It’s going to disrupt financial operationson the island via the collection of tax receipts and economicactivity.”

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