The unrest surrounding the increase in the debt ceiling in the United States is increasing economic uncertainty worldwide. World Bank CEO David Malpass said this at a summit of the G7, the group of seven rich countries, in Japan.
According to Malpass, the global economy is already weakening due to rising interest rates, which is putting a brake on investment. The risk of default by the US government therefore creates even more uncertainty, according to the World Bank CEO. “It is clear that unrest around the world’s largest economy will be negative for everyone.”
Earlier, US Treasury Secretary Janet Yellen urged Congress to raise the government’s $31.4 trillion debt ceiling to avoid an “unprecedented default.” That, she said, would trigger a global economic downturn, undermining US economic leadership.
The debt ceiling is the maximum amount of debt the U.S. government can take on by law. President Joe Biden wants the Republicans, who have 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.
Britain’s Chancellor of the Exchequer Jeremy Hunt said at the G7 summit that it would be “absolutely devastating” if the US could not strike a deal on the debt ceiling. According to him, the US economy could be ‘knocked off course’ as a result. The International Monetary Fund (IMF) has also expressed its concern about the debt ceiling impasse.
