Moody's warns US government shutdown would be 'credit negative'

Move highlight the weakness of US institutions and governance, agency says

By Reuters

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US Senator John Fetterman (D-PA) walks to the Senate chambers in the US Capitol Building in Washington, DC. Lawmakers continue negotiations on government funding as they work to avoid a government shutdown next week.   — AFP
US Senator John Fetterman (D-PA) walks to the Senate chambers in the US Capitol Building in Washington, DC. Lawmakers continue negotiations on government funding as they work to avoid a government shutdown next week. — AFP

Published: Mon 25 Sep 2023, 9:40 PM

Ratings agency Moody's said on Monday a US government shutdown would be "credit negative" as it would highlight the weakness of US institutional and governance strength compared to other top-rated governments, even though its economic impact will likely be short-lived.

US government services would be disrupted and hundreds of thousands of federal workers furloughed without pay if Congress fails to provide funding for the fiscal year starting Oct. 1. The publication of major US economic data of critical importance to policymakers and investors will also be suspended indefinitely should the federal government shut down.

"A shutdown would be credit negative for the US sovereign," Moody's, which has a triple-A rating for the US government, said in a statement.

"In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability," it said.


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