The IMF's Christine Lagarde warned the U.S. that raising the debt ceiling is paramount to the global economy's well-being. (Wikimedia Commons)

The IMF's managing director Christine Lagarde in a speech to students at the George Washington University said that the U.S. government must raise their debt ceiling. Lagarde said that failing to do so would be far more detrimental to not only the U.S. economy, but the global economy as a whole than the current shutdown.

"In the midst of this fiscal challenge, the ongoing political uncertainty over the budget and the debt ceiling does not help. The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy. So it is 'mission-critical' that this be resolved as soon as possible."

Both President Obama and the U.S. Treasury concurred with her opinion in separate statements - with the President stating on Thursday -

"As reckless as a government shutdown is, as many people as are being hurt by a government shutdown, an economic shutdown that results from default would be dramatically worse." 

The government will run out of cash and default on 17 October, unless the debt ceiling is raised. The U.S. Treasury warned in a report on its website –

"A default would be unprecedented and has the potential to be catastrophic. Credit markets could freeze, the value of the dollar could plummet, US interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."

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