World Bank: US Debt Ceiling Unease Adds Uncertainty

Unrest surrounding the debt ceiling hike in the US is adding to economic uncertainty globally. World Bank CEO David Malpass said at the G7 summit in Japan.

According to Malpass, the global economy is already weakening as interest rates rise, putting the brakes on investment. US government default risk creates more uncertainty, according to World Bank CEO “It’s clear that unrest in the world’s largest economy would be negative for everyone.”

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Earlier, US Treasury Secretary Janet Yellen urged Congress to raise the government’s $31.4 trillion debt ceiling to avoid an “unprecedented default.” That, he said, would trigger a global recession and undermine US economic leadership.

The debt ceiling is the maximum amount of debt the US government is allowed to take on by law. President Joe Biden wants Republicans, who hold the majority in the House of Representatives, to agree to raise the debt ceiling without additional conditions. Economists believe that if the ceiling is not raised, the treasury will run out of money in a few months.

Britain’s Chancellor of the Exchequer Jeremy Hunt told the G7 summit that it would be “absolutely catastrophic” if the US could not reach a deal on the debt ceiling. According to him, the US economy could be ‘derailed’ as a result. The International Monetary Fund (IMF) has also expressed its concern over the debt ceiling impasse.

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