US to reach debt limit on New Years Eve

WASHINGTON (AFP) - The United States government will reach its statutory US$16.39-trillion (S$20 trillion) debt limit - a ceiling imposed by Congress - on Monday, Treasury Secretary Timothy Geithner said.

In a letter on Wednesday to Senate Majority Leader Harry Reid, Mr Geithner said the treasury would take "extraordinary measures" to postpone the day the US could default on its liabilities, but could not say how long it had.

Mr Geithner warned that if the White House and US lawmakers fail to agree on a budget compromise to prevent the economy plunging over the "fiscal cliff", also due on Dec 31, then he could not be sure when the money would dry up.

He said the extraordinary measures - halting the issuance of some state and local government bonds - could create approximately US$200 billion in headroom that under normal circumstances would last about two months. But he added: "However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures."