Global financial chiefs Friday backed moves to greatly expand the financial war chest of the International Monetary Fund (IMF) to combat the deepest global recession since the Great Depression of the 1930s and provide a social safety net for the world's poorest.

The leaders also agreed to reshape the Fund, moving to broaden its mission and accelerate plans to give developing nations including China, Brazil and India more say within the institution.

The 24-member International Monetary and Financial Committee (IMFC)--the IMF's policy-setting body--underlined the pivotal role of the Fund in helping to restore growth and in regularly monitoring the policy actions taken by governments around the world to assess if more action is needed.

The IMFC additionally endorsed new, easier terms for Washington-based fund lending to the fast-growing number of nations reeling under the pressure of the global crisis.

The agreement was reached at a meeting of Finance ministers, central bank governors, and development ministers in Washington for the Spring Meetings of the IMF and its sister organization, the World Bank. It amounted to a broad endorsement of a shift in thinking already underway at the fund, which was outlined by world leaders at an economic summit of G-20 nations in London earlier this month.

The IMFC crucially backed plans to dramatically increase the fund's monetary resources to cope with the crisis. At the London summit, leaders of the world's 20 biggest economies and emerging nations (G-20) called for the IMF, which has the capacity to lend about $250 billion, to top up its resources to $1 trillion. The G-20 also called on the IMF, which in recent years had become largely an advisory body to nations in crisis, to take a greater role in monitoring the global economy and coordinating financial regulation.

That money would be raised firstly through $500 billion in pledges from major governments about half of which was effectively secured after Japan, the United States and the European Union had committed $100 billion each. Additionally, the IMF also has the ability to effectively print its own money, and has plans to issue about $250 billion in its currency, which has a value based on the dollar, the euro, the yen and the pound.

The fund, the IMFC said, may also consider market borrowing to increase its resources--an apparent reference to plans at the IMF to issue bonds similar to, say, U.S. Treasury bills. That would provide new ways for developing nations such as China and India to invest in the fund.

The IMF and China are close to agreeing on a deal in excess of $40 billion while India said that it is ready to contribute about $10 billion. However, other developing nations, such as Brazil, appear less willing to cough up money immediately.

Stating that participants could see signs of future recovery in the global economy IMFC Chairman Youssef Boutros-Ghali, the Egyptian Finance Minister, added, We have serious problems. We are taking very serious measures. But things are beginning to look up. Carefully, cautiously, we can say that there is a break in the clouds.

As the financial crisis has spread in recent months, the IMF has adopted a more pragmatic approach toward lending, moving away from decades of harsh terms and enforcement of strict financial policies for countries that borrow.

We're really in new times, said Dominique Strauss-Kahn, the IMF's managing director, when asked about the lighter financial requirements being imposed on some nations in Eastern Europe, particularly Hungary. He said the pace of global recovery depends significantly on the effectiveness of measures to dispose of bad loans currently on the books of major banks.

The IMF, in its semiannual Global Financial Stability Report, released April 21, warned that the challenges to restoring financial stability remain significant.

José Viñals, Financial Counselor and Director of the IMF's Monetary and Capital Markets Department, said continued decisive and effective action is needed to preserve and strengthen these first signs of improvement, and to help provide a more stable and resilient platform for sustained global growth.

The IMF in its latest forecast of the World Economic Outlook predicted that the global economy will contract by 1.3 percent in 2009. Though the rate of contraction should moderate from the second quarter of 2009 onward, output per capita is projected to decline in countries representing three-quarters of the global economy. Growth is projected to reemerge in 2010, but at 1.9 percent it would be sluggish compared to past recoveries.

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