Top officials of US and international financial institutions have ramped up warnings that failure to raise the US debt ceiling to prevent the world's largest economy from defaulting would deal a serious blow worldwide.

The warnings from the US Treasury, the head of the International Monetary Fund and central bankers at home and abroad amounted to a shot across the bow of lawmakers on Capitol Hill whose failure to agree on a funding bill has already led to a partial shutdown of the US government.

The shutdown prompted growing concern of wider economic consequences when it stretched into a fourth day today, and President Barack Obama challenged Republicans to "stop this farce" by allowing a straight vote on a spending bill.

But both sides in the standoff, triggered by Republican efforts to halt Obama's healthcare reforms, appeared entrenched.

The Treasury said the US could fall into its deepest recession since the Great Depression if Congress does not raise the $16.7 trillion cap on government borrowing soon.

The US government spends a lot more than it takes in, so not raising the debt limit would leave it unable to pay all its bills, which range from pensions for the elderly to interest on money borrowed from China.

Default could lead borrowing costs for businesses and households to skyrocket, while stock prices might plunge.

"A default would be unprecedented and has the potential to be catastrophic," the Treasury said. "The negative spillovers could reverberate around the world."

Economists say the biggest risk is that America might miss debt payments, setting off panic on Wall Street.

Many analysts speculate that the Treasury would give preference to some bills over others in an attempt to keep that from happening, but a senior Treasury official said yesterday it would be impossible to prioritise payments on debt, as some Republicans on Capitol Hill have proposed.

The government shutdown that started on Tuesday has put  hundreds of thousands of government employees out of work.

It has also delayed the publication of key economic data on the US economy, including the all important non-farm payroll figures which had been due to be published today.

Default would be worse, however. The Treasury says that if Congress does not raise the statutory debt limit, it will run out of room to borrow by October 17, at which time it will be down to its last $30 billion, which could be exhausted within weeks.

The Congressional Budget Office expects the US could start defaulting on at least some obligations between October 22 and the end of the month. Large debt payments loom on October 24 and October 31.

Global financial leaders are concerned a US crisis could hit economies across Europe, Asia, Africa and the Americas just as the world is making an uneven and uncertain recovery from the 2007-2009 recession.

US Treasury debt, long deemed risk-free, is the foundation of the global financial system. Assets around the world use US Treasuries as a benchmark for their value.

"It is mission-critical that this be resolved as soon as possible," IMF chief Christine Lagarde said in a speech yesterday.

"Failure to raise the debt ceiling could seriously damage not only the US economy but the entire global economy," she warned.

Concerns over America's political dysfunction are likely to dominate semi-annual meetings of the IMF next week in Washington, which will bring together finance ministers and central bankers from around the world.

Christian Noyer, a member of the European Central Bank's Governing Council, said he could not imagine that the US would default on its debts.

"We've got an event that is creating a risk for American growth, a serious risk if it lasts too long ... and given the importance of the American economy, a global risk," he said. "I don't dare imagine that will happen."

Obama cancels trip due to US government shutdown

US President Barack Obama has cancelled plans to attend summits in Indonesia and Brunei, bowing to the reality that the political impasse over the US government shutdown requires him to remain in Washington.

The decision means Obama will no longer depart on Saturday for what had originally been a four-nation, week-long Asia trip.

He had cancelled visits to Malaysia and the Philippines earlier this week because of his budget struggle with Republicans in Congress.

The move to cancel the remaining stops in Indonesia and Brunei, where two summits critical to US interests in Asia are being held, was made on the third day of the US government shutdown.

The move was a sign that the shutdown could linger for days, as Obama and Republicans battle over funding.

"The president made this decision based on the difficulty in moving forward with foreign travel in the face of a shutdown, and his determination to continue pressing his case that Republicans should immediately allow a vote to reopen the government," the White House said.

The stalemate has idled hundreds of thousands of federal government workers and comes two weeks before Washington faces an even more crucial deadline - raising the US debt limit so the country can pay its bills. A bitter debate rages over that issue as well.

Cancelling the trip to Asia was a direct result of the budget feud that has enveloped Washington. Republicans who control the House of Representatives have blocked a vote on legislation to fund the government because they want to gut Obama's signature healthcare law, which came into effect on October 1.