IMF Chief Criticizes US Government over Debt Ceiling Stand-Off
- May, 27, 2023 - 15:03
- World news
TEHRAN (Tasnim) – The managing director of the International Monetary Fund (IMF) criticized the US government on Friday, expressing concern about the global "anxiety" caused by the ongoing debt ceiling stand-off between President Joe Biden and the Republican Party.
Kristalina Georgieva, referring to the US economy as "the ship on which we all travel," stated that she frequently receives questions from the international community regarding the potential consequences of a US default.
She emphasized the significance of the US Treasury market as a stability anchor for the global financial system, warning that any disruption would create uncertain and tumultuous economic conditions worldwide.
Georgieva stated that a US default would inevitably lead to contraction in both the US and global economies, causing multiple shocks that could undermine the recovery from the COVID-19 pandemic and exacerbate vulnerability due to the Russia-Ukraine conflict. Discussions on the debt limit deadlock between the White House and Republican House Speaker Kevin McCarthy have been ongoing for the past week, with indications of progress but no agreement reached yet before the approaching "X-date," when the US Treasury would exhaust funds to fully meet its obligations.
US Treasury Secretary Janet Yellen revised the projected date to June 5 in a letter sent to McCarthy, pushing it back from the earlier estimate of June 1. Yellen reminded McCarthy of the risks and consequences of not raising or suspending the debt limit in a timely manner, highlighting the Treasury's inability to fulfill obligations if the issue remains unresolved.
The first full week of next month requires the US Treasury to cover payments and transfers amounting to $92 billion, exceeding the estimated available funds by that time, according to Yellen's assessment. Georgieva expressed frustration with policymakers for allowing the situation to persist until the last minute, comparing it to the Cinderella fairy tale where urgency becomes paramount.
Georgieva stressed the need to resolve the issue before it creates further disruptions, urging policymakers to act swiftly. She downplayed the impact of the stand-off on global capital markets, suggesting that it has only caused minor price fluctuations in specific sectors and has not yet reached a significant level. However, she emphasized the prevailing anxiety worldwide over a problem that should have been avoided altogether.
The IMF director called on Washington policymakers to reform the system for setting borrowing limitations to prevent recurring brinkmanship that threatens global markets. She proposed aligning the debt ceiling with the amount of appropriations approved in the annual spending bill, rather than establishing it independently from budget negotiations, as a potential solution.