A spokesperson for International Monetary Fund stated on Friday that not raising the US debt ceiling would have serious repercussions for the country and the world economy, and 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 spillover effects on the World economy”, said the spokesman in response to a query from the news agency Reuters.
“We strongly encourage the various parties to build the necessary agreement to resolve this matter,” he added.
The United States Treasury began on Thursday to take measures to prevent the government debt defaultas Congress heads into a high-stakes showdown between Democrats and Republicans over the debt limit hike.
Those “extraordinary measures” can help reduce the amount of outstanding debt subject to the limit, currently set at $31.4 trillion, but the Treasury warned that these tools would only help for a limited time, likely no more than six months.
“I respectfully urge Congress to act quickly to protect America’s full guaranteesaid the Treasury Secretary, Janet Yellenin a letter addressed to the speaker of the House of Representatives, 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 executive president of the JPMorgan Chasethe main bank of the country.
“We should never question the solvency of the United States government,” Jamie Dimon said in an interview with the network CNBC. “That is sacrosanct. It should never happen.”
The world’s largest economy could face serious disruption, with opposition Republicans threatening to reject an increase in the legal debt ceiling, could push the US into default.
Far-right Republicans, who now hold key power in the party’s narrow majority in the House of Representatives, want Biden to agree to cut public spending.
They argue that sweeping cuts are needed to reduce borrowing, which Congress has generally agreed to increase each year, raising the so-called debt ceiling.
But the White House has said that those cuts would affect key military and social security spending programsor would entail 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 would not be able to fully invest a portion of the Civil Service Disability and Retirement Fund, with a “debt hold period” lasting through early June.
Treasury will also stop further investment of amounts credited to the Postal Service Retiree Health Benefit Fund, Yellen said in announcing the latest measures.
The Treasury will begin to reduce its cash balances and resort to accounting techniques and tools to allow the government to continue its functions, it said. mickey levyfrom Berenberg Capital Markets.
But according to this analyst, the probability that the US government defaults on its debt is close to zero.
(With information from AFP and Reuters)
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