How a US Debt Default Would Impact Low and Middle Income Countries

For poorer countries, a nightmare scenario

Photo by Mark König on Unsplash

Republicans in Congress are using the threat of an unprecedented US default and the chaos that would ensue as a bargaining chip in budget negotiations with the Biden administration. Unless the United States Congress raises the so-called “Debt Ceiling,” the US Treasury will run out of money and may default on its debts. This could happen as soon as June 1st.

As of now, a US default is not a totally remote possibility.

While there’s been a good deal of ink spilled on the implications of a default to the American economy and to high income countries in Europe, there’s been less attention paid to the consequences of a US default on the rest of the world — in particular low and middle income countries.

With that in mind, I interviewed Monica de Bolle, senior fellow at the Peterson Institute for International Economics, about the global implications of a US default. This includes an extended conversation (excerpted below) about how a US default would be felt …