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U.S. Treasury Secretary Janet Yellen speaks at an event in Dakar, Senegal, January 20, 2023. /CFP
U.S. Treasury Secretary Janet Yellen warned Friday that the United States would "undoubtedly" see a recession and spur a global financial crisis if the country defaults on payments.
Speaking to reporters in Senegal, Yellen warned that Washington could also undermine the role of the dollar if it does not raise the $31.4 trillion debt limit.
"Treasury systems have all been built to pay our bills, to pay all of our bills when they are due and on time, and not to prioritize one form of spending over another," she said.
The world's biggest economy is bracing for a drawn-out battle in Congress, as Republicans threaten to block the usual annual rubber-stamping of a rise in the debt ceiling.
Yellen has informed congressional leaders that her department had begun using extraordinary cash management measures to stave off default until early June.
She said in an interview with CNN that a potential U.S. default could damage the global economy.
"A failure to make payments that are due, whether it's to bondholders or to social security recipients, or to our military, would undoubtedly cause a recession in the U.S. economy and could cause a global financial crisis," Yellen said.
This would also undermine the role of the dollar as a reserve currency used in transactions globally, she added.
(With input from Reuters, AFP)
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