US sets 'final' measure to keep balance through Aug 2

WASHINGTON: The US Treasury said Friday it would stop reinvesting its exchange stabilization fund into US debt as a "final" step to sustain the US government's spending and borrowing power through August 2.

The Treasury said in a statement that it would use its "final extraordinary measure to extend US borrowing authority until August 2."

Treasury Under-Secretary Jeffrey Goldstein called it "the last of the measures available" to keep the United States from hitting the $14.3 trillion statutory debt ceiling.

"In order to prevent a default on the nation's obligations, Congress must enact a timely increase of the debt ceiling," Goldstein said in the statement.

The new move could create another $23 billion in headroom for the government -- but not buy any time past the original projected date of August 2, the Treasury said.

The Treasury has juggled several of its operations since the debt ceiling was hit on May 16 to sustain government spending commitments.

But it estimates that from August 2 it will not longer be able to fund all its commitments unless the debt ceiling is raised by Congress, and it can borrow more.

After that day it will face the choices of defaulting on debt payments or slashing government spending on other programs. Both choices could wreak havoc in the economy and financial markets, government officials warn.

Copyright AFP (Agence France-Presse), 2011