Long internal debate over US debt battle ‘useless’ for global economy, says IMF chief

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF). .AFP file

Kristalina Georgieva, the head of the International Monetary Fund, said on Wednesday that the long internal debate over the US debt ceiling was “useless” for the global economy but should be resolved.

Georgieva also told the Qatar Economic Forum that central banks need to keep interest rates high in order to keep inflation under control, but things should improve by 2024.

The fight over US borrowing limits between US President Joe Biden and opposition Republicans has spooked international markets as the early June deadline approaches.

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Some Republicans have questioned whether an immediate deal with the US administration is needed to avoid a costly default.

“History tells us that the United States struggles with this notional default,” Georgieva said, referring to past US confrontations over spending limits.

“At the 11th hour it’s resolved and I’m confident we’ll see this game.”

But she added that the Washington drama was “unnecessary for a global economy that is in such uncertainty.”

“We always have to be aware that the risk is there.”

Georgieva said headline inflation in many countries was “peaking” due to central banks raising interest rates, but “underlying inflation, mainly due to very stubborn food prices .is still not reduced as it should”.

“Central banks need to stay the course because if they lower interest rates prematurely, tensions could become a problem for growth for a longer period,” she said.

“Interest rates are high, they will stay high for longer, but we expect 2024, early 2025, the situation will change.”

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