The International Monetary Fund has cut its global growth forecast to 2.8 percent for this year, down 0.1 percentage point from the previous projection in January.

The IMF released its latest World Economic Outlook report on Tuesday. The fund says global growth is forecast to settle at 3 percent in 2024.

According to the release, IMF has also downgraded Nepal's growth rate from its initial estimate. The IMF says the economy is expected to expand by 4.4 percent this fiscal year—from mid-July 2022 through mid-July 2023. It had previously estimated a 5 percent annual growth rate

The report says that although price increase rates are generally on a declining trend globally, inflation remains stubbornly high. It also cites recent financial sector turmoil including the failures of US banks.

The report says side effects from rapid hikes in interest rates by central banks are becoming apparent, as fears of contagion have risen across the broader financial sector.

It also warns that more possible failures in the banking sector could have a serious impact on the global economy.

IMF Research Department Director Pierre-Olivier Gourinchas told reporters that the fund has repeatedly warned of side effects from interest rate hikes and other monetary tightening measures.

He said a sharp tightening of global financial conditions would have a dramatic impact on credit conditions and public finances, especially in emerging markets and developing economies.