WASHINGTON: The International Monetary Fund warned Thursday of severe consequences if the US defaults on its debt, ahead of a rapidly-approaching deadline for the country to raise or suspend its borrowing limit.
“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,” IMF communications director Julie Kozack told reporters, encouraging all parties to urgently resolve the matter.
Republicans and Democrats remain sharply divided over the debt ceiling, with Republicans in Congress insisting the Biden administration agree to significant budget cuts in exchange for their support to lift the limit before the country runs out of money to pay its existing bills.
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Democrats have been calling for a “clean” increase of the borrowing limit, accusing Republicans of using “extreme” tactics to try and push their political agenda ahead of the so-called “X-date” – the point at which the US will be unable to meet its financial obligations.
US President Joe Biden met with Republican House Speaker Kevin McCarthy earlier this week in a failed attempt to find common ground on the issue.
The leaders are due to meet again on Friday in a bid to resolve the issue before the X-date, which the US Treasury recently warned could come as soon as June 1.
The IMF warned Thursday of the potential for higher borrowing costs, broader global instability and economic repercussions in the event of a US default.
“We have seen a world in the last few years that has been affected by many shocks, so we would want to avoid those severe repercussions,” Kozack said.
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