By Jonathan Davies

The governor of Puerto Rico has said the US territory cannot afford to pay back its $72 billion debts.

Alejandro Garcia Padilla said the US island is set to default on its debt, and will seek moratorium on repayment before setting up a team to restructure its debt.

But the White House has ruled out a central government bailout.

Part of the US Commonwealth, Puerto Rico has been in recession since 2006.

Legislators are expected to approve a $9.8bn budget, which includes $674m worth of cuts and $1.5bn set aside to repay its debts.

"Even if we increase revenues and cut costs, the magnitude of the problem is such that we would not resolve anything given the weight of the debt we're dragging," Mr Garcia Padilla said.

"The only way we'll get out of this hole is to join forces and agree, including bondholders, to assume some of the sacrifices."