The credit rating agency Moody’s warned that he sees more risk that the Government of USA fail to pay interest on the debt if the Treasury Department “exhausts” its extraordinary measures.
The United States Congress approved last month raising the debt ceiling by US $ 480,000 million above the previous limit of US $ 28.4 trillion, an amount that will allow the country to pay its outstanding debts until December 3.
In a note, William Foster, a credit executive at Moody’s, noted that this measure gives legislators “more time to reach a long-term agreement,” but said he expects new “risky bets” because “political dynamics remain unchanged.” .
“If the US Treasury Department exhausts its use of extraordinary measures, the federal government would be forced to prioritize between debt service and other payments, increasing the possibility of defaulting on debt,” added Foster.
For now, the agency has a “stable” forecast on the US “Aaa” rating “which reflects that the debt limit will ultimately be raised or suspended, and all interest payments will be made on time and in full” .
“Congress has ways to increase the debt limit, and we hope it will continue its long history of raising the debt limit in time to ensure payment,” Foster added.
If that does not happen, Moody’s believes that the Treasury would prioritize the payment of interest over other expenses to “preserve the faith and credit of the United States Government and thus avoid significant disruptions in global financial markets.”
The agency also warned that if the United States does not pay its interest, it will classify it as a “default event”, which would negatively affect the credit of sovereign debt and “would probably result in a downgrade” of the rating.
Despite everything, Moody’s expects that this default will be “ephemeral” and that the rating will remain close to “Aaa”, although “it would probably have it under review until it was clear that a remedy for the default was going to be given,” says the note.
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