IMF Warns of ‘Very Serious Repercussions’ if US Defaults on Debt Obligations – Economics Bitcoin News
The International Monetary Fund (IMF) has warned of “very serious repercussions” for both the US and the global economy if the US defaults on its debt obligations, which could be on June 1. “We must cooperate, reach consensus and resolve the matter as quickly as possible,” said the IMF’s communications director.
The International Monetary Fund warns of a US debt default
The International Monetary Fund (IMF) has warned that a US default on its debt obligations would have “very serious repercussions” for both the US and global economies.
Julie Kozak, director of communications at the International Monetary Fund, was asked at a news conference Thursday about the “spillover effects” on the global economy, particularly for emerging markets, from “the debt ceiling crisis that is now occurring between the White House and Congress, with potential defaults in As early as June 1.”
She replied, “First, it is important to note that these discussions in the United States are taking place at a very difficult time for the global economy,” adding:
Our assessment is that there would be very serious repercussions, not only for the US but also for the global economy in the event of a US debt default. We strongly encourage the parties in the United States to come together to reach consensus to address this matter urgently.
She was further asked to explain in detail “what some of these consequences might be for other countries, particularly developing economies.”
“One of the repercussions, of course, that we will see, and we could probably see, is higher interest rates, some broader instability and economic fallout,” said the IMF director. She stressed that “we have witnessed a world in the past few years affected by many shocks,” saying:
So, we would like to avoid those serious repercussions, and for this reason, we, once again, call on all parties to come together and reach consensus and resolve the issue as soon as possible.
“We expect global production growth to decline from 3.4% last year to 2.8% in 2023, before picking up to 3% in 2024,” the International Monetary Fund said in April. The fund also warned at the time that more severe turmoil in financial markets could lead to lower output growth to 1.0%, which is characterized by a sharp fall in asset prices and a sharp decline in bank lending.
US Treasury Secretary Janet Yellen has warned that the Treasury Department may not be able to pay all of the government’s bills as early as June 1 “if Congress does not raise or suspend the debt limit before then.” Similarly, the Congressional Budget Office (CBO) estimated that a US default could occur in early June.
An IMF spokesperson was also asked about the impact of the “regional banking crisis” in the US, Kozak said:
What we’ve seen is that we’ve moved from a period of low interest rates to a period of high interest rates, and since that shift happened so quickly, it revealed some vulnerabilities in some banks, particularly here in the United States. .
“The authorities in the United States have taken swift action to address these vulnerabilities, which is most welcome. But it is very important that policymakers remain vigilant as more hidden vulnerabilities may emerge in this new environment of higher interest rates.”
Do you think a US default would have “very serious repercussions” as the IMF chief said? Let us know in the comments section below.
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