US must hike debt limit soon to avoid "shock": IMF
Baku, June 30 (AZERTAC). The International Monetary Fund on Wednesday pressed U.S. lawmakers to quickly lift the government`s borrowing limit to avoid a "severe shock" to global markets and a still-fragile economic recovery.
In an annual review of the U.S. economy, the IMF said the key challenge for the country is finding a way to stabilize its debts by mid-decade without derailing growth, which is likely to remain modest for some time.
"And of course, the federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets," the IMF said in a statement.
The U.S. Treasury already has hit the existing $14.3 trillion legal limit on the nation`s debt and has warned the debt ceiling needs to be raised by August 2 to avoid a default on the nation`s obligations.
The IMF said a failure to raise the ceiling in time could lead to a downgrade in the United States` coveted AAA debt rating and send interest rates soaring. "These risks would also have significant global repercussions, given the central role of U.S. Treasury bonds in world financial markets," it said.
President Barack Obama said he believed a deal to raise the debt ceiling would be reached in time.
"Nobody wants to see the United States default. So, we`ve got to seize this moment, and we have to seize it soon," he told reporters at the White House.
At a news conference, IMF First Deputy Managing Director John Lipsky said he was certain the administration and Congress were fully aware of the risks and would not let the talks drag on unnecessarily.
Treasury Secretary Timothy Geithner on Wednesday dismissed that notion, saying investors would shun U.S. debt if any financial obligations were not met and not meeting some payments would only buy a short period of time.
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