The looming increase in interest rates by the US Federal Reserve could be sharper than markets expect, and many emerging economies will suffer the consequences, warns the International Monetary Fund (IMF), as reported in The Telegraph. \nLevels of dollar debt outside the US stand at an unprecedented high of about US$4.5 trillion, roughly half of the total US$9 trillion dollar offshore debt held in US currency. And investors appear ill prepared for the coming inflexion point, says the IMF. \nThe Fed’s rate tightening will take place just as the economies of emerging countries are losing steam, especially in Latin America and Asia, with the exception of India. Even China will most likely see its pace of growth slow to 6.3% in 2016. \nThere is cause to wonder what will happen to Russia and Brazil, for example, which borrowed heavily in dollars when rates were at historical lows. "They could face a reversal in capital flows," warns the IMF, "particularly if US long-term interest rates increase rapidly, as they did during May to August 2013."\nAdvanced economies will remain relatively immune to a rate tightening. The IMF evaluates the chances of recession at 12.5% in the US, 20% in Japan and 25% in the Euro area. But the percentage moves up to nearly 35% for Latin America, and to 45% for other countries.