As talks broke down between President Barack Obama and House Republicans on ending a standoff over federal shutdown and debt ceiling, World Bank President Jim Yong Kim warned of the disaster ahead.
"We are now five days away from a very dangerous moment," Kim said Saturday referring to the looming Oct 17 deadline when the US Treasury says it would hit the country's $16.7 trillion borrowing limit and run out of cash to pay its bills.
Urging US policymakers to quickly come to a resolution before they reach the debt ceiling deadline, he said "the closer we get to the deadline, the greater the impact will be for the developing world."
"Inaction could result in interest rates rising, confidence falling, and growth slowing," he said at the close of the annual World Bank-International Monetary Fund annual meetings here.
"If this comes to pass, it could be a disastrous event for the developing world, and that in turn will greatly hurt the developed economies as well," he said urging "US policymakers to avert this potential crisis."
Meanwhile, as the government shutdown headed into its 13th day, House Republicans said that their negotiations with Obama have stalled with the White House rejecting their latest proposal to raise the debt limit for a short term in return for talks on the budget.
Obama has said he doesn't want to begin long-term budget negotiations with congressional Republicans until the debt limit is raised and the government is re-opened, something the House Republicans have not agreed to so far.
After a House Republican Conference Saturday to mull the path forward, the 2012 Republican vice presidential candidate the House Budget Committee chairman. Paul Ryan, said there was "no deal as far as we're concerned."
The breakdown of talks dashed hopes of an early resolution of the crisis after two days of back and forth talks between the two sides amid signs of a thaw.
Meanwhile, in the Senate, Republicans blocked on a 53 - 45 vote a Democratic proposal that aimed to lift the debt ceiling through the end of 2014 without any spending offsets.
The White House condemned Republicans' rejection with press secretary Jay Carney saying, "It is unfortunate that the common sense, clean debt limit increase proposed by Senate Democrats was refused a yes or no vote today."
(Arun Kumar can be contacted at firstname.lastname@example.org)
--Indo-Asian News Service