US Congress passed a bill to re-open the government and raise the federal debt limit, with hours to spare before the nation risked default.
According to reports, the Democrat-controlled Senate passed the bill by 81 votes to 18 and the Republican-controlled House of Representatives by 285 votes to 144. It came hours before the deadline to raise the $16.7 trillion limit.
Rob Spanjaard, director at REZCO Asset Management, who is currently on a visit to the US told Justmoney that until yesterday the crisis was slow moving and mainly affected tourist destinations such as museums and national treasures like the Statue of Liberty.
Spanjaard initially predicted that the two parties would come to a compromise.
How would a default affect South Africa?
With the US in shutdown and the debt ceiling deadline (17 October 2013) looming there were grave fears over how this scenario could impact the rest of the global economy.
South Africa would not have been immune to the repercussions. Spanjaard said it could have been a world-wide crisis that would have impacted on South Africa’s already volatile rand.
The rand could’ve depreciated
“The economic crisis of 2008 showed us how inter-related the world’s economy is. Had the debt limit not been resolved South Africa’s Rand value could have dropped by 20%,” said Spanjaard.
Laura Campbell, economist at Econometrix, said the weakening Rand has already had a significant impact on the cost of vehicles.
“With the rand weakening even more, we would see a further rise in the cost to producers. The only factor keeping retailers from raising prices is the fact that South Africa has a soft demand in goods,” said Campbell.
How things stand now
According to a BBC report, the White House budget office said federal workers should return to work today.
But this new deal offers only a temporary solution as the US will have to address the debt ceiling again in February next year. With Republicans and Democrats locking heads over budgetary concerns the world will again have to hold its breath as the two parties thrash things out.
However, Spanjaard said it shouldn’t have the same impact as what took place with the impasse between the US Congress and President Obama.
“I think the default risk has cost the Republicans a lot of votes and they won’t try something like that again,” he said.