The US Ministry of Finance has postponed the default date to June 5

A default in the US may occur on June 5, if Congress does not raise or suspend the government debt ceiling by that time, according to a letter from Treasury Secretary Janet Yellen, published on the department’s website.

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The resource is almost exhausted

According to Yellen, by this date the Ministry of Finance will run out of resources to fulfill obligations. On June 1-2, the department plans to make payments in the amount of more than $130 billion, which will include payments to veterans, social benefits and medical care, and these expenses will deplete the ministry’s resources, Yellen wrote.

She reported that within a week from June 5, the Ministry of Finance must pay and transfer about $92 billion.

The Ministry of Finance resorted to an emergency measure, concluded a swap deal on securities worth about $2 billion with the Pension Fund and Disability of Civil Servants and the Federal Financial Bank, Yellen said.

She reminded that the Ministry of Finance has not resorted to this measure since 2015 due to its limited effectiveness.

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According to Yellen, the extremely low level of remaining resources requires that she exhaust “all available emergency measures to avoid the inability to meet all government obligations.” As of May 24, the Ministry of Finance had only $67 billion left for such measures, writes Bloomberg.

Government debt ceiling

In previous years, when the issue of raising the debt ceiling was being resolved, the adoption of measures at the last moment caused serious damage to business, consumer confidence, increased the cost of short-term loans for taxpayers and negatively affected the credit rating of the United States, Yellen noted.

She said that if the Congress does not increase the national debt limit, it will turn into difficulties for citizens, will harm the global leadership of the United States and will call into question their “ability to protect the interests of national security.” The minister urged the Congress to “protect full faith and trust” as soon as possible.

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Earlier, the Ministry of Finance expected the default to occur on June 1. The national debt ceiling of $31.38 trillion was reached on January 19. Over the past 40 years, this limit has been increased 45 times. The White House warned that default would cause serious damage to the US economy. On May 25, the Fitch Ratings credit agency warned that the US credit rating could be downgraded due to uncertainty surrounding the debt.

So far, the White House has not reached an agreement with lawmakers on raising the national debt ceiling.

Republicans proposed raising the limit until March 2024 in exchange for limiting government spending for 10 years, which President Joe Biden’s administration disagreed with.

Bloomberg reported that the parties were close to an agreement. According to the agency, the Biden administration defended a 3% increase in defense spending in 2024, and Republicans agreed to accelerate the issuance of permits for projects related to fossil resources, limit the increase in the budget of the Internal Revenue Service and the terms for which government spending will be limited.

Source: Ministry of Finance

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