United States: The White House and Republicans have reached a preliminary agreement to raise the US debt ceiling, preventing a potentially disastrous default. The deal still needs to be approved by a divided US Congress.

President Mr. Joe Biden hailed the agreement as a “compromise,” emphasising the importance of finding common ground. House Speaker Mr. Kevin McCarthy highlighted the deal’s “historic reductions in spending,” underscoring its potential impact on fiscal responsibility.

The urgency to strike a deal arose after the US Treasury issued a warning that the country would exhaust its funds to meet financial obligations by June 5 if no agreement was reached. A default scenario would not only destabilise the US economy but also cause disruptions in global markets.

The United States relies on borrowing to sustain its government operations due to a budget deficit resulting from higher spending than tax revenue. As part of the negotiations, Republicans have pushed for spending cuts in areas such as education and social programs in exchange for raising the $31.4 trillion debt limit. This limit is a legal restriction on the amount of debt the US government can accumulate.

Prominent Republican figures have insisted that the debt ceiling should only be raised if the government commits to reducing its spending in the coming years. Democrats, on the other hand, have proposed increasing certain taxes as an alternative solution.

During a brief press conference, Mr. McCarthy revealed that he had engaged in two phone conversations with President Biden throughout the day. The House Speaker expressed optimism, stating that while further work was necessary, the agreement in principle would benefit the American people.

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