International Monetary Fund downgrades outlook for world economy to 3.7% growth

WASHINGTON - The International Monetary Fund is downgrading its outlook for the world economy, citing rising interest rates and growing tensions over trade.

The benchmark USA 10-year Treasury yield climbed to its highest since May 2011 on Tuesday.

Iran's crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of USA sanctions that take effect on November 4. Umar told Bloomberg in August that the government may need more than $12 billion.

Obstfeld said he was not concerned about the Chinese government's ability to defend its currency against further weakening but told a news conference that Beijing would face a "balancing act" between actions to shore up growth and ensuring financial stability.

The government has inherited 6.6% of fiscal deficit, more than a trillion rupees of unaccounted for losses in the energy sector and an unprecedented and debilitating current account deficit running at $2 billion a month.

Authorities have devalued the rupee multiple times since December. "They also have a low level of reserves and a currency that is too rigid and overvalued", he added.

The most recent strain on the lira came after U.S. sanctions were imposed over an American pastor, who is being held in Turkey for almost two years over espionage and terrorism-related charges.

The IMF said the looming downturn in Turkey is a key reason for a broader revision of its growth expectations for emerging economies. The IMF talked about continued capital outflows from emerging market economies and pressure on exchange rates because of monetary normalisation in the US. "Pakistan may very well find itself seeking another bailout in the next three to four years if it does not do structural reforms".

The government has deep problems to fix. "However, it is projected to rise to 5.1 percent in 2019", the report said.

The IMF-World Bank meeting is an annual summit to discuss global financial and economic issues, including global economic outlook, poverty eradication, and aid effectiveness.

"We'll be listening very attentively when and if they come to us", Obstfeld said.

Islamabad has also taken on more than $60 billion of loans from China to bolster its decrepit infrastructure.

A senior U.S. Treasury official on Monday had also expressed concern at the fall in the Chinese yuan, adding that it was unclear whether Treasury Secretary Steven Mnuchin would meet with Chinese officials this week.

But in its latest World Economic Outlook, the International Monetary Fund cut its global economic growth forecasts for 2018 and 2019, saying trade policy tensions and the imposition of import tariffs are taking a toll on commerce while emerging markets struggle with tighter financial conditions and capital outflows.

"In the case of a flexible exchange regime the national currency, the Pak rupee, would further depreciate to around PKR140 against the USA dollar from the current PKR127".