G20 must agree big increase in IMF funds: UK's Darling

LONDON (Reuters) - World leaders must agree a "substantial increase" in funding for the International Monetary Fund to enable it to support emerging economies hit by sudden capital flight, Britain's finance minister Alistair Darling said.

Writing in Tuesday's edition of the Guardian newspaper, Darling said the action was needed to prevent the financial crisis from escalating.

"The G20 should agree on a substantial increase in the resources available to the IMF, enabling it to increase its lending to prevent the spread of the crisis from corporations to countries, and to provide liquidity support to those emerging markets facing a sudden stop or reversal in capital flows," he wrote.

Darling also called for tougher international regulation and urged governments around the world to club together to boost demand, using all tools at their disposal.

"We must also reform the international system of financial regulation and supervision. And also renew our commitment to do everything we can to support our economies through this global downturn -- using both fiscal and monetary policy," he wrote.

G20 finance ministers will meet in London this weekend to lay the groundwork for a summit of G20 leaders in early April.

European Union finance ministers meet in Brussels on Tuesday, with the plight of Eastern European countries and the need to beef up the IMF's lending power high on the agenda.

A draft paper seen by Reuters on Monday showed EU finance ministers would back a call from the IMF to double its funds to $500 billion. [nSP44526]

"Our priority must be to support those countries most at risk from the aftershock of the global financial crisis, starting with those on our own doorstep in Europe," Darling said.

(Reporting by Christina Fincher)