Government Development Bank (GDB) of Puerto Rico has declared an emergency on Saturday suspending its lending power and freezing most withdrawals. Alejandro Garcia Padilla, governor of the island's central bank has announced the emergency measures aiming to avoid default on a crucial May 1 debt repayment schedule.

The executive order is expected to protect the bank's dwindling liquidity through allowing withdrawals only for the essential public services. However, the order doesn't indicate for a moratorium on the government bank principal or interest payments. The central bank is in talks with the creditors on the $423 million debt repayment schedule, reports Fox News Latino quoting its governor.

Puerto Rico has been facing total debt of around $70 billion and 45% of its population lives beneath the poverty line. Though the island has experienced default in small debt repayment earlier, but a default from GDB's part will pose more serious risks. GDB is now unable to make the debt repayment, according to a report published in Reuters.

Saturday's executive order appears following promulgation of a new law during last week entitling 'The Puerto Rico Emergency Moratorium and Financial Rehabilitation Act'. The law empowers the GDB governor with emergency powers including ability to declare a moratorium on all bond payments, reports CNBC.

GDB depositors such as municipalities and public agencies are barred from withdrawing their money with limited exceptions for the funds related to essential services. The governor's order also suspends minimum reserve requirements at GDB while preventing the bank from lending or making payments against GDB guaranteed debts.

Intriguingly, the GDB governor has declined to exercise his authority in declaring a moratorium on its own debt repayment schedule. Continuation of restructuring talks between GDB and its creditors has been cited as the reason behind his declining.