The report, made available late Sunday, said Puerto Rico needs to restructure its debts and should make reforms including cutting the number of teachers and raising property taxes.

Governor Alejandro Garcia Padilla said that over the next week, leaders would host meetings and briefings with interested parties and will "communicate to the public the steps the Commonwealth is taking to address these issues."

"The (former IMF staffers') report for the first time acknowledges the true extent of the problem," said Padilla in a statement. "We must make difficult decisions to meet the challenges we now know are ahead, and I intend to do everything in my power to lead us through this time."

Investors have predicted the government may need to limit services in order to cut costs.

The New York Times on Sunday cited Padilla as saying that the island's debts were not payable and that creditors would probably have to take significant concessions such as five-year payment deferrals.

Puerto Rico's benchmark general obligation bonds that carry an 8 percent coupon and mature in 2035 fell 8 percent to a record average low of 70.778 cents on the dollar in early trading from 77.111 cents on Friday.

"Everything that touches Puerto Rico, the debt, the monolines (bond insurers), the banks, will all sell off pretty aggressively," said Daniel Hanson, analyst at Height Securities.

Hanson said he expected debt restructurings but thought the island lacked the political will to restructure general obligation debt. Such bonds are backed directly by tax revenues and, in Puerto Rico's case, carry a constitutional guarantee.

Shares in monoline bond insurers with exposure to Puerto Rico's securities fell sharply.

Assured Guaranty shares fell 9.9 percent while MBIA Inc fell 13.9 percent. BTIG brokerage on Monday downgraded both to neutral from buy. Assured Guaranty said it insured over $6 billion in par value of Puerto Rico bonds as of the end of March. MBIA had exposure of $4.5 billion in par value as of the end of last year.