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IMF Says US Debt Impasse Threatens Global Economy

The International Monetary Fund says the global economy could be seriously damaged if the U.S. does not increase its borrowing limit and avoid defaulting on its financial obligations.

The IMF's managing director, Christine Lagarde, told a Washington audience Thursday that the three-day-old partial shutdown of the U.S. government is worrisome, but that failure to raise the country's $16.7 trillion debt ceiling would be worse.



"The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but also the entire global economy."



The U.S. says it expects to reach its borrowing limit by October 17, and would need to increase the debt ceiling by then so it can borrow more money to pay its bills, including interest on government bonds held by overseas investors.

In a separate statement, the U.S. Treasury said there could be "catastrophic" economic effects throughout the world without an increase in the borrowing limit.

U.S. President Barack Obama, a Democrat, and his Republican opponents in Congress are locked in a stalemate over government spending policies and implementation of massive health care reforms that are now taking effect.

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