The risk of congressional impasse from an increase in the US federal borrowing cap is a risk that neither the country nor the rest of the world should be dealing with.
According to International Monetary Fund (IMF) Spokesperson #2, congressional opposition to raising the US federal borrowing limit is a risk neither the country nor the rest of the world should face.
“It has to be something we can’t even question right now,” Francine Laqua, first vice president of the Gita Gopinath Fund, told Bloomberg Television at the World Economic Forum in Davos.
She came just days after Treasury Secretary Janet Yellen said she would start special fiscal measures that could avert the crisis by early June. The federal debt ceiling of nearly $31.4 trillion is expected to be reached in the coming months.
When asked if there was a possibility of a US credit rating downgrade, 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 deadlock in Congress is likely to continue for some time to come. Republicans, who now control the House, are demanding massive spending cuts in exchange for raising the cap, while President Joe Biden and the Democrats want to raise the cap unconditionally.
“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.”
