IMF: US debt default would have global ‘repercussions’

The International Monetary Fund (IMF) has warned of severe consequences for the global economy if the United States defaults on its debt.

The IMF raised the alarm on Thursday ahead of a rapidly-approaching deadline for US lawmakers to suspend or approve the raising of the government’s colossal debt ceiling.

“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, AFP reported.

She encouraged US Republicans and Democrats, who remain sharply divided over the debt ceiling, to urgently resolve the issue.

The IMF official warned of the potential for higher borrowing costs, broader global instability and serious economic repercussions of the US defeat on its debt, according to AFP.

“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.

Republicans in Congress are adamant the Biden administration agree to major budget cuts in return for their support to raise the $31.4 trillion federal debt limit before the US runs out of money to pay its existing bills.

Democrats are accusing Republicans of using “extreme” tactics to try and push their political agenda ahead of the so-called “X-date,” which the US Treasury recently warned could come as soon as June 1.

The “X-date” is a point at which the US government will be unable to meet its financial obligations.

Earlier this week, US President Joe Biden met with Republican House Speaker Kevin McCarthy but failed to find common ground on the issue, which would trigger a global economic crisis, according to US Treasury Secretary Janet Yellen.

“A default would threaten the gains that we’ve worked so hard to make over the past few years in our pandemic recovery. And it would spark a global downturn that would set us back much further,” said Yellen ahead of a meeting on Thursday in Japan with her counterparts from the Group of Seven (G7) wealthy nations as well as India, Indonesia and Brazil.

Biden and McCarthy are scheduled to meet again on Friday in a bid to resolve the issue before the X-date.