WASHINGTON — IMF chief Christine Lagarde warned Thursday that failure to resolve the US debt crisis would likely raise “doubts” about the dollar’s status as the world’s prime reserve currency.
“It would probably entail a decline of the dollar relative to other currencies, and probably doubts in the mind of those people who reserve currencies as to whether the dollar is effectively the ultimate and prime currency of reserve,” she told PBS television in an interview.
Her comments, excerpts of which were released by the broadcaster, came as Republicans and Democrats remained locked in a showdown over rival plans to raise the US debt ceiling and stave off a looming default.
A Republican plan was expected to go to a vote in the House of Representatives later Thursday, but Democrats have warned it would be dead on arrival in the Senate.
Lagarde urged politicians on both sides “to overcome political sensitivities and concerns and doctrines, which are perfectly legitimate, for the sake of the entire country and for the sake of the global economy.”
“There’s quite a lot of concern out there,” she said on the PBS’ NewsHour show.
“The global economy is clearly highly dependent on the US economy, because the US economy is the first in the world and it’s a major power in many respects,” she said. “So to have the lead economy uncertain about its debt ceiling is quite worrisome.”