Puerto Rico said Wednesday it would further reduce its deficit and seek to renegotiate some of its debt, a day after seeing its credit rating cut to junk status. Responding to new pressure on its finances, Governor Alejandro Garcia Padilla announced he would reduce the US territory's fiscal deficit by $170 million, slashing agency budgets by two percent and renegotiating tariffs and contracts with vendors. Garcia Padilla said meanwhile the government, struggling to service some $70 billion in debt, would try to renegotiate loans for which Standard & Poor's downgrade Tuesday triggered an acceleration of payments. The rating agency lowered Puerto Rico's sovereign debt rating by one notch to BB+ -- speculative or junk status -- citing its huge debt and its still-large fiscal deficit. S&P said that the government in San Juan has limited liquidity which cannot be fully financed by the territory's Government Development Bank. The downgrade added significantly to the liquidity pressures, raising the costs of servicing the debt, especially on short-term bonds. The rating cut also came just as Puerto Rico's government was seeking to raise $2 billion in fresh financing to, in effect, buy it time to strengthen domestic finances. "Puerto Rico has a plan to strengthen our economy. We’ve been implementing our plan since I came into office in January 2013, and the hard work continues today," Garcia Padilla said in a statement. "Our government must work within our means, and continued deficit reductions are an essential initiative that will help us to achieve our goal." The Caribbean island's financial problems have shaken the $3.7 trillion market for US municipal bonds, especially in the wake of the default last year by Detroit. Enjoying broader tax breaks than most issuers in that market, Puerto Rico was able to sell huge amounts of debt over the past decade, which was meant to finance a buildup of infrastructure and revitalize the island's economy. But the economy has continued to stumble, contracting every year since 2006 even as the US economy has rebounded in the past four years.