IMF official warns US that debt costs could rise

September 09, 2011 | 11:01

(0) user say

A senior International Monetary Fund official warned Washington on Thursday not to take for granted its record-low borrowing costs.

John Lipsky (L) and Christine Lagarde at the International Monetary Fund's (IMF) - AFP

With the yield on the 10-year US Treasury bond falling this week below 2.0 per cent for the first time, John Lipsky, until last month the number two at the IMF and now a special adviser to the its managing director, Christine Lagarde, said low rates are not a green light for more borrowing.

"It's easy to claim: If this (US sovereign debt) is a big problem, why is it possible that the US government can borrow on a 10-year term for two per cent?" Lipsky said.

"Well, in view of the European experience, it's pretty obvious that this is not something that can just be taken for granted favorable market access," he said, pointing to Europe's weaker economies like Greece and Portugal now facing double-digit borrowing rates.

"Markets can change their minds, and when they do change their minds they tend to do it in a hurry," said Lipsky, speaking at a book launch at the IMF headquarters in Washington.

"So to ignore these big problems, even in the biggest economies, would be a real mistake."

AFP

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional