(Adds quotes, details from IMF news conference)
By David Lawder
WASHINGTON, May 11 (Reuters) - The International
Monetary Fund said on Thursday that a U.S. debt default prompted
by failure to raise the country's debt ceiling would have "very
serious repercussions" for the U.S. economy as well as the
global economy, including likely higher borrowing costs.
IMF spokesperson Julie Kozack also told a news briefing that
U.S. authorities needed to stay vigilant on new vulnerabilities
in the U.S. banking sector, including in regional banks, that
could emerge in the adjustment to a much higher interest rate
environment.
Kozack said the IMF could not immediately quantify the
impact that a U.S. default would have on global growth. The Fund
in April forecast global GDP growth at 2.8% for 2023, but said
that deeper financial market turmoil, marked by a severe
pullback in asset prices and sharp cuts in bank lending, could
slam output growth back to 1.0%.
But she said higher interest rates could be one result
of a U.S. default and some broader instability in the global
economy.
"We would want to avoid those severe repercussions," Kozack
said. "And for that reason, we again are calling on all of the
parties to come together, reach consensus and resolve the matter
as quickly as possible."
Detailed talks on raising the U.S. government's $31.4
trillion debt ceiling kicked off on Wednesday with Republicans
continuing to insist on spending cuts, a day after Democratic
President Joe Biden and top congressional Republican Kevin met
on the issue for the first time in three months.
U.S. Treasury Secretary Janet Yellen has warned that a
default on U.S. payments could come as early as June 1 if
Congress fails to raise the borrowing cap.
Regarding turmoil in the U.S. banking sector, Kozack
said the IMF has welcomed the "decisive" actions by U.S.
regulators and policy makers to contain the failures of three
major regional U.S. lenders in recent weeks.
Kozack added that the Fund will soon conduct its
"Article IV" annual review of U.S. economic policies, and that
assessment, to be issued towards the end of May, will analyze
the impact of pressures on regional banks, including any
tightening of credit conditions.
(Reporting by David Lawder
Editing by Frances Kerry)
