IMF Warns Of Serious Repercussions For The World If US Defaults On Its $31 Trillion Debt Next Month

With each passing day, the US is inching closer to a possible debt default and running out of cash by as soon as June 1st, 2023. The White House economists have already warned of a stock market crash and the loss of 8 million jobs if the default happens.

Amidst this, the International Monetary Fund (IMF) has raised tensions further as it warned of severe consequences not just for the US but for world economies if the US defaults on its debt. The US' national debt had already crossed $31 trillion last year.

Last week, veteran investor Warren Buffett said that he could not imagine the US defaulting on its debt.

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IMF Warns Amid US' Default Chances

"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 said.

Republicans and Democrats remain sharply divided over the debt ceiling, with Republicans in Congress insisting that President Joe Biden's administration agree to significant budget cuts in exchange for support to lift the limit before the country runs out of money to pay its existing bills.

Democrats have been calling for a "clean" increase of the borrowing limit, accusing Republicans of using extreme tactics to try and push their political agenda ahead of the so-called "X-date," the point at which the US will be unable to meet its financial obligations.

The IMF warned of the potential for higher borrowing costs, broader global instability, and economic repercussions in the event of a US default.

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"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, as per an AFP report.

The lifting of the debt ceiling has historically been seen as a routine affair, given that it involves raising money to pay for spending commitments already made by Congress. But with the Biden administration refusing to negotiate on the debt ceiling, a standoff has arisen just weeks before the US risks running out of money to pay its obligations, as soon as June 1st.

Also Read; IMF Chief Calls India A 'Bright Spot' In The Global Economy

Joe Biden Says Default Is Not An Option

"Default is not an option," US President Joe Biden reportedly said earlier this week. This came after Joe Biden and congressional leaders confronted each other on the debt limit impasse and ended their meeting with no breakthrough but agreed to meet again this week to try to avert the looming risk of an unprecedented government default, as the AP report mentioned.

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Speaking at the White House, Biden described the talks as "productive," even though House Speaker Kevin McCarthy said after the high-stakes Oval Office meeting that he "didn¡¯t see any new movement" towards resolving the stalemate.

Also Read: Recession Will Hit One-Third Of The World In 2023, Others Too Will Feel Like In Recession, Warns IMF Chief

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