IMF warns US after 11th-hour budget deal

The International Monetary Fund has appealed to Washington for more stable management of the nation’s finances as Asian stock markets rose after US leaders agreed to avoid a default and end a 16-day government shutdown.

With hours to spare until the $16.7 trillion debt limit was reached, Congress passed and sent a waiting president Barack Obama legislation to allow more borrowing and reopen government agencies.

“World heaves sigh of relief as US barely averts debt default,” said the Times of India newspaper in a headline.

IMF managing director Christine Lagarde welcomed the deal but said the shaky American economy needs more stable long-term finances.

The deal only permits the Treasury to borrow normally until February 7 and fund the government through to January 15.

“It will be essential to reduce uncertainty surrounding the conduct of fiscal policy by raising the debt limit in a more durable manner,” Ms Lagarde said in a statement.

The Tokyo stock market, the region’s heavyweight, gained as much as 1.1%, while markets in China, Hong Kong and South Korea also rebounded from losses.

China and Japan, which each own more than a trillion dollars of Treasury securities, appealed earlier to Washington for a quick settlement.

There was no indication whether either government had altered its debt holdings.

China’s official Xinhua News Agency had accused Washington of jeopardising other countries’ dollar-denominated assets. It called for “building a de-Americanised world”, though analysts say global financial markets have few alternatives to the dollar and US government debt for trading and holding currency reserves.

Asian companies and investors had expressed confidence the United States would avoid a default but had sold Treasury securities to avoid possible losses if Washington delayed repayment. Others put off buying stocks that might be exposed to a US downturn.