Treasury Secretary Steven Mnuchin told telling congressional leaders Friday that Congress should raise the debt ceiling before leaving for its August recess.

The Treasury has been taking extraordinary steps since March to shuffle its cash around to continue paying its bills after hitting the $22 trillion debt limit set by Congress.

Officials have issued dire warnings that without an increase in the borrowing limit, the US could default on its debt for the first time and they have been urging the legislature to act before the summer break later this month.

'Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes,' Mnuchin warned in a letter to House Speaker Nancy Pelosi.

He also wrote to Senate Leader Mitch McConnell.

In a letter Friday to House and Senate leaders, Mnuchin says that based on updated projections, 'there is a scenario in which we run out of cash in early September, before Congress reconvenes.'

Deal time: Pelosi says she is working to finalize a deal that would temporarily raise the debt ceiling before the House of Representatives shuts down July 26

Pelosi late Thursday said she is working to finalize a deal that would temporarily raise the debt ceiling before the House of Representatives shuts down July 26, according to news reports.

The House is not scheduled to reopen until September 9.

The Bipartisan Policy Center, a centrist research organization, projected this week that lower-than-expected federal revenues this year could leave the government without the cash it needs in early September.

'Weaker-than-expected corporate income tax collections, in particular, seem to be related to the 2017 tax cuts,' the BPC said in its report Monday.

The United States lost its coveted AAA debt rating in 2011, following battles among lawmakers in Washington over whether to lift caps on US sovereign borrowing, raising the likelihood of a US default.

Because the federal government traditionally runs a budget deficit, it has no choice but to borrow to finance government operations, including salaries, retirement benefits, social spending and other expenses already approved by Congress.

The Treasury previously said it could hold out until late summer, but the latest letter adds more urgency to the debate. It has suspended issuing new debt, and halted investments by government pension funds.

Pelosi said Thursday that she wants to complete a deal with Trump this month that would raise the government's borrowing limit and set spending levels for the coming budget year.

Pelosi's office said the California Democrat spoke twice with Treasury Secretary Steven Mnuchin on Thursday.

She told reporters she is convinced that the double-barreled negotiation - to prevent a first-ever default on U.S. obligations and prevent automatic spending cuts - needs to be completed before Congress leaves Washington for its August recess.

Mnuchin and Pelosi are taking the lead in the talks, which are backed by a bipartisan quartet of top congressional leaders and the White House.

Pelosi has made clear her distaste for other administration officials, including Acting Chief of Staff Mick Mulvaney, a former Republican tea party congressman, saying they are unproductive negotiators.

Pelosi and Capitol Hill GOP leaders want to pair the unpopular debt measure with a new spending 'cap' for the approximately $1.3 trillion in agency budgets appropriated by Congress each year.

Pelosi didn't say she was 'realistic' about the chances of a deal, but it is clear this week's round of talks with Mnuchin are serious.

'When we have an announcement we will have an announcement,' Pelosi said.

Lawmakers, especially Republicans, greatly dislike votes every year or two to increase the government's borrowing cap, currently set at $22 trillion.

But allowing a first-ever default on government obligations such as Treasury redemptions, payments to contractors, and federal employee payroll could rattle financial markets and harm the government's credit rating.

The United States lost its coveted AAA debt rating in 2011, following battles among lawmakers in Washington over whether to lift caps on US sovereign borrowing, raising the likelihood of a US default.

Because the federal government traditionally runs a budget deficit, it has no choice but to borrow to finance government operations, including salaries, retirement benefits, social spending and other expenses already approved by Congress.

The spending side of the negotiation is fueled by Democratic demands for non-defense accounts and GOP defense hawks' demands for increases for the Pentagon.

The House has passed most of its spending bills, but the Senate has not even started, causing unease for lawmakers such as Majority Leader Mitch McConnell, R-Ky., who has tried to revive the chamber's appropriations process.

Hardliners such as Mulvaney have suggested a spending freeze at the generous levels permitted under the expiring spending pact, but there's pressure from all sides for more spending. Among the complications: what to do about a spike in costs for the U.S. Census and billions of dollars for private-sector health care for veterans.