US Default Threat: Till now you must have heard about defaulting of loans taken by Sri Lanka and Pakistan. But do you know that America, the world’s largest economy, can also default in paying the debt. This is to say of the International Monetary Fund which has given this warning. IMF says that if America defaults in repaying its debt, then its impact may not only be on America, but the entire global economy may have to bear the brunt of it.
Appealing to all parties to find a solution as soon as possible, IMF’s Communications Director Julie Kojack said that we estimate that if America defaults on debt, its bad consequences will be felt not only on America but also on the global economy.
In fact, Republicans and Democrats in America are divided on the level of debt. Republicans in the US Parliament Congress demand that the President Joe Biden administration agree to a budget cut in lieu of increasing the debt limit. If this does not happen, the debt crisis on America can deepen. Democrats want the debt ceiling to be raised. They are accusing the Republicans of furthering their political agenda.
The IMF cautioned that borrowing on default would be costly, as well as global instability and other economic effects could also be seen. Julie Kojack said that in the last few years the world has faced many shocks. In such a situation, any possibility of US defaulting should be avoided.
Increasing the loan limit has always been happening. This is necessary for Congress to meet its spending commitments that it has already approved. But when Republicans won a small majority in the House of Representatives during last year’s midterm elections, the right wing of the caucus pressured Kevin McCarthy to tackle America’s rising debt in exchange for their support.
The Biden administration refused to negotiate on the debt limit. After which the situation of confrontation has arisen. This has instilled fear in the minds of the people that whether America will be able to fulfill its debt repayment obligations or not. However, it is believed that an attempt will be made to remove this deadlock through talks.
