The IMF warned that failure to raise the US debt ceiling could have serious repercussions globally.
A spokesperson for the International Monetary Fund urged parties involved to work to resolve the impasse to avoid spillover effects around the world
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The world's largest economy could face severe disruption (REUTERS/Kevin Lamarque)
A spokesman for the International Monetary Fund said on Friday that not raising the ceiling on US debt would have serious repercussions for the country and the global economy, and he urged the parties involved to work to resolve the impasse.
“The world economy is facing another difficult year. There would be serious repercussions if the US debt ceiling were not raised, there would be serious repercussions, both for the United States and through indirect effects on the global economy,” the spokesperson said in response to a query. from the Reuters news agency.
“We strongly encourage the various parties to build the necessary agreement to resolve this matter,” he added.
The US Treasury began taking steps Thursday to prevent the government debt default, as Congress heads into a high-stakes showdown between Democrats and Republicans over the debt limit hike.
Those “ “extraordinary measures” may help reduce the amount of outstanding debt subject to the limit, currently set at $31.4 trillion, but Treasury cautioned that these tools would only help for a limited time, likely no more than six months.
“I respectfully urge Congress to act swiftly to protect America's full guarantee,” Treasury Secretary Janet Yellen said in a letter to the Speaker of the House, the Republican Kevin McCarthy.
Yellen, the Treasury officer in Democratic President Joe Biden's government, had said last week that “failure to meet government obligations would cause irreparable damage to the American economy, the livelihoods of all Americans, and global financial stability.” .
A default would damage the credibility of the United States, something that should never happen, warned the chief executive of JPMorgan Chase, the country's largest bank.< /p>
A spokesman for the International Monetary Fund said on Friday that failing to raise the US debt ceiling would have serious repercussions (REUTERS/Yuri Gripas/File Photo)
“We must never question the solvency of the US government” Jamie Dimon said in an interview with CNBC. “That is sacrosanct. It should never happen.”
The world's largest economy could face severe disruption, with opposition Republicans threatening to reject an increase in the legal debt ceiling, which could push the US into default.
Far-right Republicans, who now hold key power in the party's narrow majority in the House, want Biden to agree to cutting public spending.
They argue cuts are needed radical cuts to reduce debt, which Congress has generally agreed to increase each year, raising the so-called debt ceiling.
But the White House has said those cuts would affect key programs of military and social security spending, or would mean new taxes.
The White House also vowed that Biden would not negotiate with hardline Republicans given their “risky and dangerous” opposition to raising the debt ceiling.
For now, the Treasury could not fully invest a portion of the Civil Service Disability and Retirement Fund, with a “debt hold period” lasting through early June.
Treasury will also halt additional investment of amounts credited to the Postal Service's Retiree Health Benefit Fund, Yellen said in announcing the latest steps.
Treasury will begin to reduce its cash balances and resort to techniques and tools accountants to allow the government to continue its functions, said Mickey Levy of Berenberg Capital Markets.
But according to this analyst, the likelihood that the government defaults on its debt is close to zero.
(With information from AFP and Reuters)