Lengthy internal debate over US debt battle 'unnecessary' for world economy, says IMF chief

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

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

The struggle over US borrowing limits between US President Joe Biden and opposition Republicans has spooked international markets, with an early June deadline nearing.

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

“History tells us that the US wrestles with this notional default,” Georgieva said referring to past US showdowns over spending limits.

“At the 11th hour, it gets resolved and I have confidence we will see this play.”

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

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

Georgieva said headline inflation in many countries was “peaking” because of central banks raising interest rates but “core inflation, primarily because of very stubborn food prices. is still not trimming down the way it should”.

“Central banks have to stay the course, because, if they move back on interest rates prematurely, then tension may become a problem for growth for a longer period of time,” she said.

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

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