U.S. Political Standoff Hangs Over IMF, World Bank Meetings

The world's top financial officials were in Washington, D.C. over the weekend for the annual meetings of the International Monetary Fund and the World Bank. The partial government shutdown and the debt ceiling standoff were hot topics among the visiting world financial leaders.

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DAVID GREENE, HOST:

This is MORNING EDITION from NPR News. Good morning. I'm David Greene.

STEVE INSKEEP, HOST:

And I'm Steve Inskeep. Let's get some perspective on the federal budget standoff.

The world's richest nation is days away from a self-inflictive wound - having trouble paying its bills.

CHRIS ARNOLD, BYLINE: Republicans have said they can't raise the federal debt ceiling unless they win some concessions from President Obama. But GOP lawmakers have struggled to agree on what exactly they want - while the president and Democrats in Congress have said they won't negotiate until the debt limit is raised.

GREENE: At the same time, a partial government shutdown continues. Now, over the weekend, Senate leaders were talking about possible solutions.

INSKEEP: In a moment we'll ask if this crisis is really so different from the past. First, we'll ask what world financial leaders are thinking. They held the annual meetings of the International Monetary Fund and the World Bank - which means they gathered in a placed with plenty to see, the dysfunctional national capital known as Washington.

NPR's Chris Arnold reports.

ARNOLD: The IMF and World Bank event is a pretty amazing gathering. The most powerful economic policymakers from scores of countries all over the world come together with the goal of making the entire planet more prosperous and healthy. That's always a tall order. But this year there's a U.S.-manufactured cloud hanging over things, as Treasury Secretary Jack Lew told Congress the other day.

SECRETARY JACK LEW: I met with finance ministers from Africa and finance ministers from Latin America, and it's challenging when they look at you and they ask what's going on in Washington. It makes them nervous about their economies.

ARNOLD: That's because if investors get worried about the U.S., that ripples through the entire global financial system.

ANGEL GURRIA: Because it's the largest economy in the world, it's the largest trading nation in the world, the largest source of investment flows in the world, etcetera, but also because we're concerned about the overall governance of the United States.

ARNOLD: That's Angel Gurria of Mexico. He represents 34 countries around the world as the secretary general of the OECD. That's the Organization for Economic Cooperation and Development.

He says the U.S. needs to not just delay this debt ceiling standoff by six weeks or six months, it needs to resolve it completely. And the world is wondering, if we can't even do that, how can the U.S. make much tougher decisions to put itself on sound financial footing longer term?

GURRIA: All these things have to be negotiated, and with such polarization, things are complicated, but hopefully reason will prevail.

ARNOLD: There are lots of business people at these meetings too. There are executives from companies that print money, for example. They actually like inflation because that means they get to print more money. There are South American Investment bankers. And I bumped into Obi Ugochukwu, who is the founder of a website for investors in Nigeria.

OBI UGOCHUKWU: We have a data platform called BroadStreetLagos.com, which is like the Yahoo Finance for Nigeria.

ARNOLD: Ugochukwu says Nigeria's economy suffered after the financial crisis five years ago. But in the past year, Nigerian stocks had been coming back. The country's banks were getting on more solid footing. Things were looking up. But more recently, he says, foreign investors are pulling money out of the market. He thinks that was first due to concern that the U.S. Federal Reserve might put the brakes on stimulus - but he says more recently it's been because of this latest standoff in Washington.

UGOCHUKWU: With the debt ceiling in the U.S. and the impasse between the Republicans and the Democrats, I think psychologically is effecting investor participation in the market.

ARNOLD: So you mean even all the way in Nigeria, in the Nigerian stock market with Nigerian companies...

UGOCHUKWU: Yeah.

ARNOLD: ...what's happening here in Washington is affecting things?

UGOCHUKWU: Yes. Ten, 15 years ago you wouldn't have seen that.

ARNOLD: When investors get nervous about the stability of the U.S. and whether it might default, that makes everybody more risk-averse. So they're less eager to invest money in Nigeria and lots of other developing countries. So delegates here say that there are just so many ways in which shaking people's confidence in the U.S. economy gets felt abroad.

That said, many here also think, though, that the U.S. will manage to get past this debt ceiling showdown. IMF managing director Christine Lagarde.

CHRISTINE LAGARDE: Because we have faith in human beings and in their sagacity in view of the potential risks that would result from the materialization of this accident. So we do have faith and I hope we won't be let down.

ARNOLD: Looking down the road past the debt ceiling crisis, some other big issues talked about here: figuring out when central banks should start to taper down their stimulus efforts, and creating a banking union across Europe to help stabilize European economies.

Chris Arnold, NPR News, Washington.

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