WASHINGTON, UNITED STATES : An impending deadline for the US to increase or suspend its borrowing ceiling prompted the International Monetary Fund to issue a dire warning on Thursday.
According to Julie Kozack, director of communications at the IMF, “our assessment is that there would be very serious repercussions not only for the US but also for the global economy should there be a US debt default,” urging all parties to swiftly settle the issue.
Republicans in Congress insist that President Joe Biden’s administration agree to severe budget cutbacks in exchange for support to raise the limit before the nation runs out of money to pay its existing debts, while Republicans and Democrats remain sharply split over the issue.
Democrats have been pushing for a “clean” rise in the borrowing cap, accusing Republicans of employing harsh measures to further their political agenda before the so-called “X-date” — the moment when the US would no longer be able to pay its debts.
Additional Unstability
The IMF issued a warning on Thursday about the possibility of increased borrowing rates, wider global instability, and negative economic effects in the event of a US default.
We would like to prevent those serious consequences because “we have seen a world in the last few years that has been affected by many shocks,” Kozack said.
Given that it includes generating money to pay for expenditure obligations already made by Congress, raising the debt ceiling has traditionally been considered as a normal event.
Last year’s midterm elections gave Republicans a slim majority in the House of Representatives, and the right wing of the caucus demanded that Kevin McCarthy, the party’s new speaker, address the growing national debt in exchange for their backing.
However, an impasse has developed just weeks before the US runs the risk of not having enough money to pay its debts because the Biden administration will not talk about raising the debt ceiling.
Earlier this week, President Biden met with McCarthy in an unsuccessful attempt to find agreement on the subject.
Biden declared after the negotiations that “default is not an option,” while McCarthy told reporters that he “didn’t see any new movement” during the meeting, which was also attended by the minority leader of the House, the majority and minority leaders of the Senate.
