The U.S. debt issue is adding to problems facing a slowing global economy, with rising interest rates and high debt levels already choking back investments needed to fuel greater output, World Bank President David Malpass said on Friday.
"Clearly, distress in the world's biggest economy would be negative for everyone," he told Reuters on the sidelines of the G7 finance ministers and central bank governors' meeting in Niigata, Japan. "The repercussions would be bad to not get it done."
During the meeting, Malpass emphasized that record-high global debt levels need to be addressed for stability, adding that the debt-to-GDP ratios for the advanced economies are higher than ever before.
The U.S. Congressional Budget Office (CBO) on Friday warned that at some point in the first two weeks of June, the government might no longer be able to pay all of its obligations.
The CBO also noted that the federal government's debt payments "will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June."
U.S. Treasury Secretary Janet Yellen on Friday urged the Congress to raise the debt ceiling. She said she would meet next week with senior Wall Street bankers about the possibility that Washington could default on its debt for the first time since 1789.
She has called repeatedly for Congress to raise the $31.4 trillion cap on federal borrowing to avert the "economic and financial catastrophe" that would ensue if the U.S. defaulted on its debts.
(With input from Reuters)
(Cover: Kristalina Georgieva, managing director of the International Monetary Fund (L), speaks with David Malpass, president of the World Bank Group (C), at the G7 finance ministers and central bank governors' meeting in Niigata, Japan, May 11, 2023. /CFP)