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IMF says US must solve debt crisis

US President Barack ObamaIMF managing director Christine Lagarde says failure to raise the debt ceiling is a far worse threat to global economy than the current government shutdown.

She said it was "mission critical" that the US agrees a new debt ceiling.

A deadlock over the budget between President Obama and Congress has shut down many government functions.

But a further problem looms. The US is reaching the limit of its agreed borrowing and if it cannot agree to increase that it will run out of money.

In a speech looking ahead to a decade of challenges for the world economy, Ms Lagarde said that the US government needed to fix its finances for the long term.

But as she has often said before, there should not be too much change in the short term because that could undermine the economic recovery.

 

Shutdown

US President Obama and Congressional leaders have been in political deadlock for days, which has had the effect of freezing non-essential US government functions.

The US government closed non-essential operations on Tuesday after Congress failed to strike a deal on a new budget.

The shutdown has left more than 700,000 employees on unpaid leave and closed national parks, tourist sites, government websites, office buildings, and more.

However, as one budget crisis raged in Washington DC, another one - potentially more dangerous - looms in the coming weeks.

On 17 October, the US government will run out of cash to pay its bills unless the debt ceiling is raised.

Source: BBC

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