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IMF hails fight against financial crisis

WASHINGTON, October 13 – The International Monetary Fund and the World Bank hailed Sunday progress made to coordinate responses to the financial crisis in the G7, the eurozone and multilateral institutions, but urged that poor countries not be forgotten.

At the end of three days of negotiations in Washington, and a summit in Paris Sunday, governments had made significant advances in proposing cohesive solutions, including steps on an uprecedented scale and cost.

The twin 185-nation institutions highlighted those efforts in annual meetings overshadowed by the financial crisis.

"I am confident (they will work)," the IMF managing director, Dominique Strauss-Kahn, said at a news conference.

On Friday the Group of Seven advanced economies agreed a five-point action plan, pledging to prevent the collapse of any systemically important bank.

The G7 — the United States, Britain, Canada, France, Germany, Italy and Japan — said they would use all means available to combat the crisis, having already spent hundreds of billions of dollars to support their banks and financial systems.

That plan was endorsed Saturday by the IMF and the Group of 20 rich and emerging countries.

On Sunday the leaders of the 15 eurozone nations agreed in Paris on a joint strategy to bolster market confidence by underwriting inter-bank loans and safeguarding financial institutions from collapse.

"I welcome the result of the eurozone meeting," Strauss-Kahn said, adding that the IMF had been calling for months for coordinated action and was now seeing it fall into place.

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"Nearly all advanced countries are now covered and the … eurozone provisions may be extended eventually to all of Europe," he said, noting earlier US and British proposals to safeguard their banks and financial system.

"The eurozone plan is also comprehensive," something which the IMF had also been seeking, he said, adding: "Altogether we are going in a good direction."

World Bank president Robert Zoellick, speaking at the joint news conference, said the financial crisis, the worst since the 1929 market crash, underscored the need for coordinated action to build a better multilateral system.

"We need to modernize multilateralism for a new global economy," he said. "We need concerted action now to … build a better system for the future."

Zoellick announced that the International Finance Corp, the private-sector lending arm of the IMF, was exploring the possibility of a fund to help recapitalize banks in the developing world.

With donor aid programs under pressure due to the financial crisis, the World Bank estimates that up to 100 hundred million people are at risk of falling into poverty because of higher food and energy prices.

Picking up on complaints that the crisis will put recent hard-won economic gains in the developing world at risk, Zoellick insisted that this would not be allowed to happen.

"Developing countries … risk very serious setbacks to their efforts to improve the lives of their populations from any prolonged tightening of credit or a sustained global slowdown," Zoellick said.

"We must … ensure that as governments and publics turn their attention to problems close to home, they do not step back from their commitments to boost overseas assistance to meet the Millennium Development Goals," he said.

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IMF head Strauss-Kahn echoed that concern, saying "the financial crisis adds a crisis to a crisis (of rising food and energy prices in poor countries.)

"We should not forget this other crisis," he said after a meeting of the World Bank and IMF\’s Development Committee which advises the two bodies on economic development issues.

Earlier, several developing country representatives told the committee they faced serious additional challenges if their concerns and needs were downgraded or forgotten as the rich nations focussed on their own problems.

The poorer countries could be hit twice by the crisis — finding it more difficult to get access to funding and as their exports fall as the crisis undercuts demand, Indian Finance Minister P. Chidambaram said.

"The developing countries will suffer for no fault of theirs. They did not cause the contagion. Many are not well-equipped to face the consequences," Chidambaram told the committee during the IMF and World Bank annual meetings in Washington.

The plight of the weakest has been "largely forgotten," Sierra Leone Finance Minister David Carew told a separate news conference on Highly Indebted Poor Countries.

"We expect to see a reduction of inflows to Africa and that is of concern to us," Carew said, citing likely falls in remittances, foreign exchange reserves and foreign investment as the crisis bites deeper.

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