SAN JUAN, Puerto Rico (AP) — Puerto Rico’s governor unveiled a stark budget Monday that sets aside more than US$200 million for a critical bond payment as the US territory sinks into a deep economic crisis.

The proposed US$9.1 billion budget for the upcoming fiscal year is US$700 million smaller than the current one and calls for nearly US$3 billion in cuts to government operating expenses.

Legislators have to approve a budget by July 1, the day a US$2-billion debt payment is due. Governor Alejandro Garcia Padilla said he set aside only US$209 million to help pay interest linked to that debt. The anticipated default is scheduled to be Puerto Rico’s biggest one yet.

“We have made clear that we’re not going to pay more than what is fair so as not to affect essential services,” he said in a televised address. “Paying it in full would have meant stripping health services from approximately more than a million people, or we would have had to lay off countless numbers of police officers, closed a hospital, be left without school transportation or garbage collection.”

Puerto Rico is being smothered by US$70 billion in public debt that Garcia has said is unpayable as he seeks relief from the US government because there are no local or federal laws that allow Puerto Rico to declare bankruptcy. A recently approved US House bill would allow for some restructuring and establish a federal control board, but the US Senate still has to debate the measure as Puerto Rico’s government warns it is running out of time and money.

The proposed budget does not call for any new taxes or more borrowing.

“We will depend exclusively on money collected by the Treasury Department,” Garcia said. “It has never been so difficult for a government to present a budget. We are at a stage of uncertainty.”

With Puerto Rico struggling from a 10-year economic slump, the proposed budget shields the health, education, public security, agriculture and social welfare agencies from new cuts. It also seeks to set aside US$215 million for struggling municipalities that depend on the island’s Government Development Bank, which is under a state of emergency and is running out of money. The budget also calls for an additional US$25 million to boost resources and eliminate the operational deficit at the island’s largest hospital.

In addition, an extra US$75 million is proposed to help boost government pensions, which have been underfunded by more than US$40 billion.

Opposition legislator Maria de Lourdes Santiago, who supports independence for Puerto Rico, criticised the governor’s speech as being opaque and evasive on a critical issue.

“A message that lacked content and the ongoing pleading attitude points to a lack of will for anything except to sit and wait for the US Congress and the implementation of a fiscal control board,” she said.

Vicente Feliciano, an economist and business consultant in San Juan, said he was still analysing the budget but warned of an intense debate in coming weeks.

“The legislature will have to make difficult decisions that it would not like to take under normal circumstances,” he said.