IMF’s Georgieva confident US will not default on debt

DOHA, Qatar – The managing director of the International Monetary Fund (IMF) Kristalina Georgieva said on Wednesday, May 24, she was confident the United States would avoid a debt default.

The US government could fall behind on its bills next month – and even default on its debt – if Congress doesn’t raise a $31.4-trillion cap on government borrowing, a failure that could trigger economic calamity and panic on global financial markets.

The latest round of talks on the debt ceiling between representatives of President Joe Biden and congressional Republicans ended without progress on Tuesday, May 23, as the June 1 deadline inched closer.

“History tells us that the US would wrestle with this notion of default…but come the 11th hour it gets resolved and I have confidence we will see that play again,” Georgieva said at the Qatar Economic Forum in Doha, organized by Bloomberg.

Finance ministers from Saudi Arabia and Qatar, who joined Georgieva for the panel discussion, agreed that a resolution was needed sooner rather than later.

“I hope wisdom will prevail and prevail sooner [rather than later]…. It is not easy to play with the international markets, and when they catch a cold, everybody will sneeze,” Mohammed Al Jadaan, the Saudi finance minister, said.

Georgieva said that the USdollar is likely to remain a global reserve currency despite increasing discussion on moves by countries to reduce their reliance on the greenback, known as “de-dollarization.”

“We don’t expect a rapid shift in [dollar] reserves because the reason the dollar is a reserve currency is because of the strength of the US economy and the depth of its capital markets…. Don’t kiss your dollars goodbye just yet,” Georgieva said.

During Georgieva’s visit to the Gulf state, she met with the Emir Sheikh Tamim bin Hamad Al Thani.

Qatar has pledged 20% of its Special Drawing Rights (SDR) holdings towards the IMF’s Poverty Reduction and Growth Trust and Resilience Support Trust mechanisms for financial support, Georgieva said on Twitter.

SDR is an international reserve asset created by the IMF to supplement other reserve assets of member countries. According to the IMF website, Qatar has SDR holdings of 985 million.

“The pledge made today would allow the IMF to expand concessional lending to low-income countries and expand lending to vulnerable-to-climate-shocks countries,” Georgieva said in a video shared by the Qatar News Agency. – Rappler.com