Moody’s Investors Service downgraded the debt of Puerto Rico to just above junk status on Thursday, putting pressure on the governor-elect, Alejandro García-Padilla, to show credible plans for staving off a crisis.

Although Puerto Rico’s economic difficulties are no secret to investors, its debt is widely held, thanks to its unusual exemption from all federal, state and local income taxes across the United States. If the commonwealth’s creditworthiness were to fall below investment grade, some institutional investors would be required to sell their holdings.

A downgrade would also make it more expensive for Puerto Rico to raise money, something it has had to do every year to finance government operations.

Moody’s said in its report that its outlook for Puerto Rico remained negative. It cited concern about Puerto Rico’s high level of indebtedness and its shrinking population. Moody’s also expressed concern about the island’s pension system for government workers, which is considered one of the weakest in the United States.