The US House of Representatives has approved a bill that extends the federal government’s debt ceiling until January 1, 2025.

The legislation, known as The Fiscal Responsibility Act of 2023, was introduced to Congress on Sunday and was passed by a vote of 314 to 117. However, it still requires approval from the US Senate and President Joe Biden’s signature to prevent a potentially catastrophic default on government debt.

If the legislation is enacted, the US debt limit will be increased to match the actual debt level on January 2, 2025. This means that the US Department of Treasury must resort to extraordinary measures shortly after the 2024 presidential election.

Goldman Sachs estimates that the total federal government debt in the United States will exceed $35 trillion by January 2025. To avoid a default on government debt, President Biden and House Republicans reached a preliminary agreement on Saturday.

The US reached its debt limit of $31.4 trillion in January and faced the risk of defaulting on its debt obligations by June 5 if the limit was not raised or suspended.

The potential default has caused domestic and international concerns, leading Fitch Ratings to place the US AAA-rated long-term foreign-currency issuer default rating on a ‘negative watch.’