Economy

IMF Urges US to Raise or Suspend Debt Cap, Says Risk Avoidable

IMF Urges US to Raise or Suspend Debt Cap, Says Risk Avoidable

(Bloomberg) — The International Monetary Fund urged the US to immediately raise or suspend its debt limit, saying that delays in doing so may create “entirely avoidable” systemic risks.

“Brinkmanship over the federal debt ceiling could create a further, entirely avoidable systemic risk to both the US and the global economy at a time when there are already visible strains,” the IMF said in a statement Friday. 

“To avoid exacerbating downside risks, the debt ceiling should be immediately raised or suspended by Congress,” the fund said in the concluding statement of its article IV consultation, the IMF’s assessment of countries’ economic and financial developments following meetings with lawmakers and public officials.

The fund’s warning comes as Republican and White House negotiators are moving closer to an agreement to raise the debt limit and cap federal spending for two years, according to people familiar with the matter, as time grows short to avert a catastrophic US default.

The two sides have narrowed differences in talks over recent days, according to the people, though the details agreed to are tentative and a final accord is still not in hand. They have yet to agree on the amount of the cap.

Treasury Secretary Janet Yellen indicated to Congress earlier this month that the department could run out of sufficient cash as soon as June 1.

©2023 Bloomberg L.P.

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