The International Monetary Fund (IMF) has activated an emergency finance mechanism to help countries hit by the financial crisis. IMF chief Dominique Strauss-Khan said the lending procedure would allow the IMF to react quickly to support countries facing funding problems. The scheme, which was used during the Asian financial crisis in 1997, will help speed up approval of loans. He said the world was “on the cusp of recession”, but could still recover. The IMF has already sent a mission to Iceland, where the government has taken control of its three biggest banks. Speaking ahead of meetings of the IMF and World Bank, Strauss-Khan urged countries to act “quickly, forcefully, and co-operatively” to solve the global economic problems. A day after seven central banks around the world cut interest rates in an effort to calm financial markets, the IMF chief said further coordinated action was necessary. All kinds of policy cooperation are to be commended,” he said. But he issued a stark warning against countries acting unilaterally to fight the crisis, referring to recent isolated moves by certain European Union member countries. “There is no domestic solution to a crisis like this one.” Finance ministers from the G7 group of wealthy nations are also meeting in Washington this weekend. It has been yet another turbulent week on world financial markets. Strauss-Khan said the events of the past few weeks were beginning to take their toll on emerging economies as credit lines were cut and as trade was being hit by slowing demand in Western economies. He said the IMF was ready to assist any country in need of funding through its emergency aid mechanism, set up in 1995 to help Mexico stabilise its financial system after a crisis of confidence that led to sharp declines in the country's currency. The Philippines, Thailand, Korea and Indonesia also drew on the mechanism to access billions of dollars of loans after the eruption of the Asian financial crisis in 1997. Separately, World Bank president Robert Zoellick warned against letting the “financial crisis become a human crisis”. He said a drop in exports combined with higher credit costs will trigger business failures in the poorest economies and, in some cases, “bankrupt” countries. Acknowledging there was no “silver bullet” to fix the global financial difficulties, he said it was up to the Group of Seven industrialized countries to work together to come up with a plan to solve it. “Countries will take different actions, customised to their circumstances, yet the actions need to target the same basic problems,” he said. Zoellick said that the Group of Seven leading industrial nations need to get “ahead of the curve” on the financial crisis and also help poor countries deal with their problems. “I hope the G-7 will point toward coordinated action to show that authorities are getting ahead of the curve,” he said. Strauss-Kahn said “the situation is very serious, but at the same time that we can solve problems if we act quickly, forcefully and cooperatively.”
