IMF calls for hike in U.S. debt ceiling

By Lee Chi-dong
WASHINGTON (Yonhap) - The International Monetary Fund (IMF) urged the United States Wednesday to quickly raise its federal debt ceiling, giving ammunition to President Barack Obama in his battle with congressional Republicans.
In its annual report on the world's largest economy, the Washington-based agency warned of a "severe shock" to the U.S. economy and global financial markets unless the debt limit is raised soon.
"The federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets," it said.
The IMF said downside risks to the U.S. economy outlook have increased, citing continued housing market weakness, unfavorable fiscal outcomes, further shocks over commodity prices and tight credit supply conditions.
"These could take the form of a sudden increase in interest rates and/or a sovereign downgrade if an agreement on consolidation does not materialize or the debt ceiling is not raised soon enough," it said. "These risks would also have significant global repercussions, given the central role of U.S. Treasury bonds in world financial markets."
The IMF forecast the U.S. economy will grow 2.5 percent this year, down from 2.9 percent in 2010.
Obama has been struggling to reach a deal with Republican lawmakers to raise the amount the government can borrow to help finance its operations. The U.S. reached its $14.3 trillion borrowing limit in May.
The U.S. government will default on its debt if it doesn't raise the limit by the Aug. 2 deadline.