United States lawmakers approved the bill to raise America's debt ceiling on Thursday, allowing the government to avert a disastrous credit default by borrowing more.

America spends more money than it collects through taxation, so it borrows money via the issuing of government bonds.

Lawmakers introduced a limit on how much federal debt could be accrued, but the ceiling has been raised for the 103rd time since 1945. The debt stands at around $31.5 trillion, more than 120 percent of the U.S. GDP.

Both parties see raising the debt limit as politically toxic, although they acknowledge that failure to do so would plunge the U.S. economy into a depression and roil world markets if the government misses debt repayments. 

"While the White House's debt ceiling agreement is great news, the U.S. government still has a cash flow problem and time is of the essence to finalize the agreements," said Bob Stark, global head of market strategy at treasury and financial management firm Kyriba.

"The debt ceiling agreement is only the first step in saving the government from the brink of illiquidity," he added.

As with previous debt-ceiling sagas, the current passage of the deal represents a trade-off of partisan interests following a monthslong game of chicken between Democrats and Republicans, with each side trying to use an imminent default as a bargaining chip for advancing their political agenda.

"It is frankly an insult to the American people to support a piece of legislation that continues to put our country's financial future at risk," U.S. Representative Matt Rosendale, a Republican from the U.S. state of Montana, lamented in a statement.

It's not just Americans who have been on tenterhooks watching the cyclical U.S. partisan game.
Over half of the world's foreign currency reserves are held in dollars, which means "a U.S. default could wreak havoc on global financial markets," the U.S. Council on Foreign Relations said in a recent report.

A decrease in the dollar's value triggered by default or the uncertainty surrounding it "could make debts denominated in other currencies relatively more expensive and threaten to tip some emerging economies into debt or political crises," added the think tank.

"The U.S. as the world's biggest economy has taken the global economy hostage by politicizing and polarizing its internal political issues on global financial markets," said Joseph Matthews, a senior professor at the BELTEI International University in Phnom Penh.

Without concrete measures to reform the U.S. fiscal system, the repeated adjustments of the debt ceiling have proven to be nothing but only a Sisyphean task. This time is no exception.

Even though a deal was reached before the deadline, "such risks will keep reoccurring until comprehensive reforms are enacted," said Steven Wright, associate dean for Student Affairs and associate professor of International Relations at the College of Humanities and Social Sciences of Hamad Bin Khalifa University, Qatar.

(With input from agencies)