Yellen reiterates US could default on debt by early June

Washington, May 16

In a letter to Congressional leaders, US Treasury Secretary Janet Yellen reiterated that the country could default on its debt obligations as early as June 1.

The Department of Treasury will likely no longer be able to satisfy all of the governments' obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1, Yellen said in the letter sent on Monday.

She made the assessment after obtaining additional information on the latest data, and federal receipts, outlays, following her earlier letter of this kind on May 1, reports Xinhua news agency.

"Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the US," warned Yellen.

"In fact, we have already seen Treasury's borrowing costs increase substantially for securities maturing in early June," she added.

If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm US global leadership position, and raise questions about U.S. ability to defend its national security interests, according to the Treasury Secretary.

The second meeting between President Joe Biden and congressional leaders on budget and debt ceiling will now take place on Tuesday.

Biden and congressional leaders discussed the budget issue for the 2024 fiscal year last Tuesday but failed to generate meaningful breakthroughs.

Though Biden has expressed optimism on prospects of the second meeting, Republican House Speaker Kevin McCarthy said on Monday that there's been "no progress" on debt ceiling talks ahead of the meeting.

In January, the US hit its $31.4 trillion debt limit, set in December 2021, prompting the Treasury Department to use accounting maneuvers known as "extraordinary measures" to keep the government paying its bills, such as curbing certain government investments.