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IMF warns US of global debt â€˜shockâ€™

30 June 2011 08:49 (UTC +04:00)

Baku. Vahab Rzayev - APA-Economics. The International Monetary Fund has warned of a â€œsevere shockâ€ to global financial markets if the US does not move quickly to increase its borrowing authority, adding pressure on Congress and the White House to clinch a deal on fiscal policy.

In its annual report on US economic policy, the IMF cited â€œunfavourable fiscal outcomesâ€ as one of the main dangers to the countryâ€™s economic outlook.

â€œThese could take the form of a sudden increase in interest rates and/or a sovereign downgrade if an agreement on consolidation does not materialize or the debt ceiling is not raised soon enough,â€ the IMF said.

It added: â€œThese risks would also have significant global repercussions, given the central role of US Treasury bonds in world financial markets.â€

The US Treasury has said that if Congress does not raise the debt limit â€“ at present at $14,300bn â€“ the US will run out of cash to pay its obligations and could default as early as August 2.