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IMF readies emergency aid for wounded economies

WASHINGTON - The International Monetary Fund said on Thursday it was ready to help countries hit by the raging global credit crunch and had activated an emergency financing mechanism first used in the 1990s Asian crisis.

The Fund already has a mission in Iceland, where the government has seized control of its largest bank, and has warned that the worst financial crisis since the 1930s Great Depression could inflict lasting economic harm on the world.

"Yesterday I activated emergency procedures so the IMF can respond quickly ... to be able to answer problems that may happen in some of the emerging countries," IMF Managing Director Dominique Strauss-Kahn told a news conference.

"We are ready to answer any demand by countries facing problems," he added.

Panic over toxic U.S. mortgage loans has sapped confidence in financial institutions, forced governments to pledge hundreds of billions of dollars of taxpayer money and pushed central banks to deliver the first coordinated interest rate cut.

Speaking ahead of IMF and World Bank meetings of finance leaders in Washington this weekend, Strauss-Kahn said the main task of global policy-makers was to restore confidence in global markets.

Group of Seven finance ministers and central bank chiefs also meet in Washington on Friday to consider their options.

The IMF's emergency facility was created in 1995 as a way of speeding up the approval of loans to countries in need.

It was first used in 1997 to help the Philippines, Thailand, Indonesia and South Korea end crushing runs on their currencies during the Asian financial crisis.

Emerging markets are under pressure again after strains in the United States and Europe spread. Investors are fleeing their securities for safer assets, foreign banks are cutting lending and their exporters are braced for weaker demand from Western consumers.

Strauss-Kahn called for more coordinated steps to calm markets, beyond the unprecedented simultaneous action of central banks on Wednesday to cut rates to contain the crisis.

He said the global economy was on the cusp of recession but with quick and forceful action, the spreading crisis could be contained.

"All kinds of cooperation has to be recommended. All lonely acts have to be avoided, if not condemned," he said.