May 27, 2023

IMF chief compares U.S. debt fight to Cinderella at midnight

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The head of the International Monetary Fund, Kristalina Georgieva, sharply criticized the United States for delaying a possible agreement in the debt dispute until the last minute.

The stability of the global financial system is at stake, warned the head of the IMF.

She expressed frustration about “12th hour” negotiations in the U.S. political dispute in the U.S. about whether to raise the limit on government borrowing.

“We all have read the fairy tale about Cinderella having to leave the ball exactly at midnight. And we’re at this point,” Georgieva told reporters on Friday in Washington.

“So before our carriage turns into a pumpkin, could we please get this solved? It’s not just the loss of a shoe that we are faced with.”

For weeks, Democrats and Republicans have been arguing in tough rounds of negotiations about raising the debt limit.

According to the U.S. Treasury Department, the U.S. will default on its debt in early June if the limit is not raised.

A debt default by the U.S. could have catastrophic implications for the global economy, most experts have warned.

Also on Friday, the IMF emphasised that robust consumer demand and the strong labour market were a kind of “double-edged sword” for the U.S. economy.

“They certainly buoyed American families, but they also contributed to persistent inflation,” Georgieva said.

The IMF, therefore, predicts that the key interest rate will remain at more than 5 per cent until the end of 2024 and urged the U.S. government to do more to reduce the public debt burden.