Unrest surrounding the increase in the debt ceiling in the United States is adding to economic uncertainty around the world. This was stated by David Malpass, CEO of the World Bank, at the G7 summit, the group of seven rich nations, in Japan.
According to Malpass, the global economy is already weakening due to high interest rates, which limit investment. Thus, the risk of default on the part of the US government creates more uncertainty, according to the World Bank CEO. “Obviously, the turmoil around the world’s largest economy is going to be negative for everyone.”
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Earlier, US Treasury Secretary Janet Yellen urged Congress to raise the government’s debt ceiling of $31.4 trillion to avoid an “unprecedented default.” She said this would lead to a global economic downturn, undermining the economic leadership of the United States.
The debt ceiling is the maximum amount of debt that the United States government is allowed by law to take on. President Joe Biden wants Republicans, who hold a majority in the House of Representatives, to agree to raise the debt ceiling without additional conditions. Economists believe that the Treasury will run out of cash within a few months if the ceiling is not raised.
British Chancellor of the Exchequer Jeremy Hunt said at the G7 summit that it would be “extremely devastating” if the US could not strike a deal on the debt ceiling. According to him, the US economy could “derail” as a result. The International Monetary Fund has also expressed concern about the debt ceiling impasse.
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