(Adds statement from governor's office, paragraph 3)

By Nick Brown

July 26 (Reuters) - Puerto Rico can crawl out of its $72 billion debt hole without defaulting on its government debt, says a report commissioned by holders of $5.2 billion of the U.S. commonwealth's government-backed bonds.

By cutting expenses, including on education, and improving tax collection, Puerto Rico could erase its deficit by 2017, according to a report by Jose Fajgenbaum, Jorge Guzman and Claudio Loser, former International Monetary Fund economists and now consultants at Centennial Group.

Puerto Rico Gov. Alejandro Garcia Padilla's office criticized the report on Sunday. The governor's chief of staff, Victor Suarez, responded in a statement that the island has "already enacted significant fiscal reforms," including pension concessions.

Centennial was retained by a group of holders of so-called general obligation Puerto Rican bonds, including Fir Tree Partners, Brigade Capital Management and Monarch Capital Group.

Trying to right its ship after a decade of stagnation and a shrinking population, Puerto Rico wants to negotiate concessions from creditors keen on protecting their investments. With analysts expecting a default, the island could wind up in messy litigation with creditors.

A month ago, a report by former IMF official Anne Krueger, commissioned by Puerto Rico's government, said the island's woes must be solved through concessions from bondholders combined with fiscal and economic adjustments.

Around the same time, Padilla called for a wide-ranging debt restructuring, deeming the island's debt "unpayable."

Suarez on Sunday said "the simple fact remains that extreme austerity" alone "is not a viable solution for an economy already on its knees."

But Puerto Rico has a "deficit problem, not a debt problem," Centennial said in its report.

"The debt in the medium term is sustainable," Loser told reporters in a conference call on Sunday. "There is no need for a general restructuring."

Loser said Puerto Rico will face a roughly $2.5 billion financing gap in fiscal year 2016.

But, the report said, the island collects only 56 percent of potential sales tax revenue, and has increased education expenditures by 39 percent in the last decade as enrollment has dropped 25 percent. Fixing those ratios could yield a surplus by fiscal 2017, the report said.

Loser said Puerto Rico's debt is not "monolithic," coming from some 18 issuers, and acknowledged some individual debt issuers may try to restructure.

The island's fate is muddied by the lack of a restructuring statute akin to U.S. bankruptcy law.

(Reporting by Nick Brown in New York; Editing by Grant McCool)