Clare » May 12th, 2023
US default would have ‘very serious repercussions’: IMF
May 11, 2023
The International Monetary Fund warned Thursday of severe consequences if the US defaults on its debt, ahead of a rapidly-approaching deadline for the country to raise or suspend its borrowing limit.
“Our assessment is that there would be very serious repercussions not only for the US but also for the global economy should there be a US debt default,” IMF communications director Julie Kozack told reporters, encouraging all parties to urgently resolve the matter.
Republicans and Democrats remain sharply divided over the debt ceiling, with Republicans in Congress insisting that President Joe Biden‘s administration agree to significant budget cuts in exchange for support to lift the limit before the country runs out of money to pay its existing bills.
Democrats have been calling for a “clean” increase of the borrowing limit, accusing Republicans of using extreme tactics to try and push their political agenda ahead of the so-called “X-date” — the point at which the US will be unable to meet its financial obligations.
– Broader instability –
The IMF warned Thursday of the potential for higher borrowing costs, broader global instability and economic repercussions in the event of a US default.
“We have seen a world in the last few years that has been affected by many shocks, so we would want to avoid those severe repercussions,” Kozack said.
The lifting of the debt ceiling has historically been seen as a routine affair, given that it involves raising money to pay for spending commitments already made by Congress.
When Republicans won a narrow majority in the House of Representatives during last year’s midterm elections, the right wing of the caucus insisted incoming speaker Kevin McCarthy tackle the ballooning US debt in exchange for their support.
But with the Biden administration refusing to negotiate on the debt ceiling, a standoff has arisen just weeks before the US risks running out of money to pay its obligations.
President Biden met with McCarthy earlier this week in a failed attempt to find common ground on the issue.
“Default is not an option,” Biden said after the talks had concluded, while McCarthy told reporters he “didn’t see any new movement” in the meeting, which was also attended by the Senate majority and minority leaders and the minority leader of the House.
The talks will resume on Friday as both sides look to resolve the issue before the X-date, which the US Treasury recently warned could come as soon as June 1.
The Central Bank refers speculators with exchange rate issues to the competent courts
In response to citizens’ requests for the US dollar currency at the official exchange rate for legitimate purposes, the Central Bank of Iraq succeeded in providing easy and appropriate tools represented in the facilities packages it issued, which include support for the settlement of electronic cards at the official rate and money transfers of various types, but some of those who were able to obtain cards
They were misused far from the intended goals for this purpose, as revealed by the reports of the competent security authorities and the supervisory procedures of the Central Bank and the Office of Combating Money Laundering and Terrorism Financing, which called for the establishment of a “strict new electronic system” that ends this phenomenon and the violations used in those cards.
The Central Bank of Iraq revealed the completion of legal procedures against the violators, individuals, companies and banks, announcing their referral to the courts specialized in money laundering and financing terrorism, stressing its keenness to provide all appropriate tools to achieve the stability of the exchange rate, especially with the arrival of external transfers through the electronic platform to high levels
In addition to the use of electronic cards and the cash sale of dollars, all of this made what is called the “parallel market exchange rate” not reflect the real exchange rate as long as the Central Bank of Iraq responds to all (legitimate requests) to buy dollars, and that the price in the parallel market is linked to activity. Speculation, and non-fundamental operations trying to move away from the methods provided by the Central Bank of Iraq law and its decisions.
Central Bank of Iraq
12 – May – 2023
Source: Dinar Recaps
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