BUSINESS

U.S. Debt Impasse 'Dangerous' For Global Economy

10/13/2013 06:15 EDT | Updated 01/23/2014 06:58 EST
The World Bank is warning of serious consequences for the global economy if politicians in the U.S. fail to increase their government's borrowing limit.

The bank's president, Jim Yong Kim, says there is a danger of rising interest rates and slower growth.

Speaking Saturday at the end of the annual meeting of the World Bank and the International Monetary Fund in Washington, the bank's president, Jim Yong Kim, said there is a danger of rising interest rates and slower growth.

Kim warned the repercussions for developed and developing economies would be "disastrous."

"We are now five days away from a very dangerous moment," he said. "I urge U.S. policymakers to quickly come to a resolution before they reach the debt ceiling deadline [on Thursday].

"The closer we get to the deadline, the greater the impact will be for the developing world. Inaction could result in interest rates rising, confidence falling, and growth slowing.

"If this comes to pass, it could be a disastrous event for the developing world, and that in turn will greatly hurt the developed economies as well. I urge U.S. policymakers to avert this potential crisis," Kim said at the end of three days of talks involving the World Bank and its sister lending agency, the 188-nation International Monetary Fund.

The weekend meeting of global financial leaders ended with some hope over signs that the U.S. and European economies are pulling out of long economic slumps.

However, that optimism was overshadowed by the U.S. political standoff, which has blocked approval of legislation to increase Washington's borrowing limit before a fast-approaching deadline this week.

U.S. Treasury Secretary Jacob Lew warns he'll exhaust his borrowing authority on Thursday and the government will face the prospect of defaulting on its debt unless Congress increases the $16.7 trillion borrowing limit.

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