WASHINGTON -- The U.S. needs to get "its act together" and raise the debt limit before a default derails the nation's recovery and damages the world economy, a top International Monetary Fund official said Wednesday.
Short-term interest rates have risen in recent days, reflecting concerns that the fiscal standoff in Washington has not been resolved, said José Viñals, the director of the IMF's monetary and capital markets department.
And though the partial government shutdown is a "bad outcome" for the global economy, a potential U.S. government default would be much worse, he said.
"This is something that would have very serious consequences through financial markets and the rest of the world," Viñals told reporters during the annual meeting of the IMF and World Bank.
"So it is completely of the essence that the U.S. political machinery gets its act together and ends this impasse," he said.
Viñals stressed Wednesday that the IMF thinks the risk of a federal government default is low even as the nation gets closer to the Oct. 17 deadline set by the Treasury Department for raising the $16.7-trillion debt limit.
After that date, the U.S. will run out of borrowing authority and be dependent on cash on hand and incoming revenues to pay the government's bills. The Obama administration has warned that the nation will be at risk of default at that point.
An analysis Tuesday by the Bipartisan Policy Center think tank projected that the U.S. would be unable to pay all its bills between Oct. 22 and Nov. 1, when a series of large payments are due.
Many congressional Republicans are balking at raising the debt limit without major concessions by the White House, including deep spending cuts. Some Republicans have argued that the U.S. could avoid a technical default by using incoming revenues to pay interest on U.S. debt.
Viñals said a failure by the U.S. to make scheduled payments on Treasury bonds would shake financial markets and reverberate globally.
"This will have a very negative impact on the economies of every country I can think of, so let’s hope we don’t get there," he said. "It would be a worldwide shock."