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IMF warns of growing risks, would welcome weaker dollar

The IMF will warn G-20 finance ministers this weekend of growing risks to the world economy from surging food prices and public finances.
Ministry Of Finance | 24.07.2011
The IMF will warn G-20 finance ministers this weekend of growing risks to the world economy from surging food prices and public finances while also advocating a somewhat weaker dollar.

The Fund's report to a two-day meeting starting today, pointed to rising bond yields as a key risk to the U.S. fiscal outlook and global growth, and said the euro zone needed to take more comprehensive steps to deal with an ongoing debt crisis. The report, entitled Global Economic Prospects and Policy Challenges, warned that a two speed rebound in the world economy is underway, posing a problem to policy makers trying to shore up recovery following the financial crisis.

"The global economic recovery is advancing. However the recovery remains uneven, with downside risks in advanced economies remaining elevated while overheating risks are growing in emerging economies," it said.

It said some depreciation of the dollar would help support more balanced world growth and reiterated that China's yuan was substantially undervalued in real effective terms. "Some further real effective depreciation of the U.S. dollar would help ensure a sustained decline of the U.S. current account deficit towards a level more consistent with medium term fundamentals, helping to support more balanced growth," the report said. (Reuters)