In front of the US's looming May 11, 2023 deadline to increase or suspend its borrowing ceiling, the International Monetary Fund issued a dire warning about the effects of a US debt default.
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 cap before the nation runs out of money to pay its existing debts, while Republicans and Democrats remain bitterly split over the issue.
Democrats have been pushing for a "clean" rise in the borrowing cap, accusing Republicans of employing extreme 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.
The IMF issued a warning on May 11, 2023, about the possibility of increased borrowing rates, generalized global instability, and negative economic effects in the case of a US default.
We would like to prevent such serious consequences because "we have seen a world in the last few years that has been affected by many shocks," Kozack added.
Due to the fact that obtaining funds to cover existing spending obligations is required, increasing the debt ceiling has generally been viewed as a regular procedure.
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 only 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 reach agreement on the subject.
Biden said 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 Senate majority and minority leaders and the minority party.
On Friday, the discussions will pick up again as both parties attempt to find a solution before the X-date, which the US Treasury has warned may occur as early as June 1, 2023.
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