Fund struggles with finances

Washington: The International Monetary Fund's (IMF) policy-setting committee called on finance ministers and central bankers of its 185 member states to be vigilant in containing fin-ancial market turbulence.

The IMF committee lauded the role of central banks in the developed world in limiting the credit crisis by injecting hundreds of billions of dollars into the financial system. However, it warned central bankers of the threat of inflation and urged them to keep a firm grip on food and fuel prices.

IMF managing director Rodrigo de Rato said he was optimistic despite the credit concerns. "The global economy is expanding from a solid foundation," he said.

Deeper problems

The meeting agreed that financial innovation in the packaging of securities based on subprime mortgages in the US has contributed to enhanced risk diversification and improved market efficiency, but has thrown up new challenges that must be addressed.

"The turbulence has revealed a number of problems that may be deeper than the specific episode that triggered the tensions," said Italian Economy Minister Tommaso Padoa-Schioppa, the new head of the IMF's policy-making committee. He said some institutions involved in the packaging must be monitored.

The post-meeting statement by the IMF's policy setting body said the global economic growth was moderate. Financial growth in fast-growing economies and strong fundamentals continue to support the world economy, they said

The IMF committee meeting followed a session of the Group of Seven industrialised countries on Friday that pledged to limit the damage to the global economy caused by the credit turmoil triggered by US subprime woes.