October 13, 2013 - 22:03 AMT
PanARMENIAN.Net - The president of the World Bank, Jim Yong Kim, has warned that the United States is just "days away from a very dangerous moment" because of the government's borrowing crisis.
According to BBC News, he urged U.S. policymakers to reach a deal to raise the government's debt ceiling before the Oct 17 deadline.
The U.S. Treasury will start to run short of funds if no agreement is reached for it to borrow on financial markets.
Kim warned this could be a "disastrous event" for the world.
"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," said Kim, speaking at the World Bank's annual meeting in Washington.
"If this comes to pass it could be a disastrous event for the developing world and that will in turn greatly hurt the developed economies as well," he added.
If the US does run short of cash, this could cause it to default on its debts, a development which would be likely to have a severe effect on financial markets around the world.
Republicans and Democrats failed to come to an agreement on Saturday, but Senator Dick Durbin, a Democrat, said the aim was to reach a deal on extending the debt limit before markets reopen on Monday, Oct 14.
The White House rejected a deal for a short-term increase to the borrowing limit.
"It wouldn't be wise, as some suggest, to just kick the debt ceiling can down the road for a couple of months, and flirt with a first-ever intentional default right in the middle of the holiday shopping season," said President Barack Obama.
The U.S. government has been in partial shutdown since Congress missed an Oct 1 deadline to pass a budget, with politicians being unable to agree funding for current spending.
This has resulted in hundreds of thousands of federal employees being sent home and government offices closing.
Republicans refused to approve the new budget unless President Obama agreed to delay or eliminate the funding of the healthcare reform law of 2010.