President Joe Biden and House Speaker Kevin McCarthy have reached an “agreement in principle” on raising the US debt ceiling, according to sources in Washington.
The tentative deal would bring to an end the months-long stalemate between the Republican controlled Congress and Democrat run White House.
Currently, the debt ceiling stands at $31.4trn (£25.4trn) with the new limit yet to be announced.
Mr Biden and Mr McCarthy held a 90-minute phone call on Saturday evening to discuss the deal, as the 5 June deadline looms.
Following the conversation, the speaker tweeted: “I just got off the phone with the president a bit ago.
“After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people.”
During a very brief press conference on Capitol Hill Mr McCarthy said they “still have more work to do tonight to finish the writing of it”, adding that he expects to finish writing the bill on Sunday, then hold a vote on Wednesday.
The deal would avert an economically destabilising default, so long as they succeed in passing it through the narrowly divided Congress before the Treasury Department runs short of money to cover all its obligations.
Republicans have pushed for steep cuts to spending and other conditions, including new work requirements on some benefit programmes for low-income Americans and for funds to be stripped from the Internal Revenue Service, the US tax agency.
They said they want to slow the growth of the US debt, which is now roughly equal to the annual output of the country’s economy.
Exact details of the deal were not immediately available, but negotiators have agreed to cap non-defence discretionary spending at 2023 levels for two years, in exchange for a debt ceiling increase over a similar period, according to Reuters news agency.
The impasse frightened the financial markets, weighing on stocks and forcing the US to pay record-high interest rates in some bond sales.
A default would take a far heavier toll, economists say, likely pushing America into recession, rocking the world economy and cause unemployment to spike.