The Congressional standoff over raising the limit on US federal borrowing is a risk that neither the country nor the rest of the world ought to face, according to the International Monetary Fund’s No. 2 official said.
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The Congressional standoff over raising the limit on US federal borrowing is a risk that neither the country nor the rest of the world ought to face, according to the International Monetary Fund’s No. 2 official said.
“It really should not be something that we are even second-guessing at this point,” Gita Gopinath, the fund’s first deputy managing director, told Francine Lacqua in an interview with Bloomberg Television at the World Economic Forum in Davos.
She spoke days after Treasury Secretary Janet Yellen said her department will begin taking special accounting maneuvers that should avert a crisis until early June. The federal debt limit of nearly $31.4 trillion is expected to be reached in a matter of months.
Questioned on whether there’s a possibility of an outcome where the US faces a downgrade in its credit rating, Gopinath agreed.
“There is certainly a risk to it,” she said. “Given the dynamics we have in the US Congress there will certainly be some tensions around it. I really hope they just get the job done and do the right thing.”
The standoff in Congress is likely to persist for a while. Republicans now in control of the House have been demanding deep spending cuts as the price for an increase in the ceiling, while President Joe Biden and congressional Democrats want the limit raised without conditions.
“There’s already enough uncertainty, there’s enough risks that we have to deal with,” Gopinath said. “This shouldn’t be an additional risk that the US or the world should have to deal with.”
–With assistance from Simon Kennedy.
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