Washington: The International Monetary Fund has warned the United States to lift its debt ceiling swiftly for the sake of the US and global economy. (Agencies)
But, with US politicians battling over a plan to slash the deficit, the IMF executive board called on authorities to only gradually reduce spending, to avert "a disruptive loss in fiscal credibility."
"The federal debt ceiling should be raised expeditiously to avoid a severe shock to the US economy and world financial markets," IMF economists said in a report on the US economy on Monday.
Executive directors called for the US to gradually unwind the extraordinary support provided the economy to deal with the 2008-2009 financial and economic crisis.
"Spillovers from credible and gradual fiscal consolidation are limited," it said, while those from a loss of confidence in US debt sustainability "are universally large and negative."
A downgrade on the United States's top-rated sovereign debt, which ratings agencies have warned could happen amid the political impasse, would reflect deep troubles in the US financial system.
The IMF has told US authorities that "it's worth (fiscal) consolidation, even if it has some negative short-run effects, because the alternative is so complex, so difficult that it's better not to go there," Rodrigo Valdez, a senior IMF adviser, said in a conference call with reporters.
Another IMF official, Gian-Maria Milesi-Ferretti, told reporters that other countries were concerned about the risk of a "loss of confidence in the US and hence an abrupt and large depreciation of the dollar accompanied by disruptions in international financial markets."
Democratic and Republican lawmakers were in negotiations on Monday trying to break a prolonged deadlock over raising the government's USD 14.3 trillion borrowing cap, linked to a long-term plan to reduce a swollen budget deficit.
US President Barack Obama's administration and top lawmakers failed over the weekend to reach a deal to save the world's richest country from a disastrous default on its debt on August 2.
Washington: The International Monetary Fund has warned the United States to lift its debt ceiling swiftly for the sake of the US and global economy.