Washington: Treasury Secretary Jacob Lew has warned that the US could be on path of default if the Congress did not increase the nation’s borrowing limit by late February.

In a letter to the Congress, Lew said the Treasury would hit the borrowing limit by February 7 and by taking some extraordinary measures, it can avoid default by late February.

The current US debt limit stand at USD 17.3 trillion.

“I respectfully urge Congress to provide certainty and stability to the economy and financial markets by acting to raise the debt limit before February 7, 2014, and certainly before late February,” Lew said in his letter to the top Congressional leadership.

Lew said when he previously wrote to the Congress in December, he estimated that Treasury would exhaust extraordinary measures in late February or early March.

“Based on our best and most recent information, we believe that Treasury is more likely to exhaust those measures in late February,” he said.

“While this forecast is subject to inherent variability, we do not foresee any reasonable scenario in which the extraordinary measures would last for an extended period of time,” Lew said.

The length of time that the extraordinary measures can extend the nation’s borrowing authority is significantly shorter than it was in 2011 and 2013, he said, adding this is in large part because the government experiences large net cash outflows in the month of February, due to tax refunds.

For example, in 2013, the government experienced net cash outflows of approximately USD 230 billion in the month of February, as compared to average net outflows of USD 45
billion in the other months of the year.

Moreover, this year the payment of tax refunds will be particularly concentrated in the  weeks after February 7 due to the delayed start of the tax filing season, which was caused by the government shutdown, he wrote.

“Protecting the full faith and credit of the US is the responsibility of Congress, because only Congress can extend the nation’s borrowing authority. No Congress in our history has failed to meet that responsibility,” Lew wrote.

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