April 12, 2008 / 2:20 AM / in 11 years

Decisive rich nation action needed on crisis: G24

WASHINGTON (Reuters) - Developing countries on Friday called for “decisive” policy actions by rich industrial nations to ensure financial turmoil originating in the United States did not spread and cause their economies to falter.

The Group of 24, which brings together developing countries from Africa, Asia and Latin America, also called on the International Monetary Fund to “urgently” improve its monitoring of the United States and other advanced economies.

So far, emerging economies have been mostly unscathed by the crisis, which sprang out of U.S. subprime mortgage problems and spread to western Europe, but they said they worried it could further slow global growth and tighten credit markets.

A G24 communique also called on rich industrial nations to provide the poorest countries with extra aid to deal with spillovers from the financial crisis and mounting pressures from rising food prices.

Such assistance should be in addition to — and not part of — aid already promised by donor nations to help poor countries tackle poverty and disease, the G24 said after their semi-annual meeting on the sidelines of the IMF and G7 gathering in Washington.

“To face increasing prices for food, donors and bilateral entities should increase support for affected countries,” Jean-Claude Masangu Mulongo, central bank chief for the Democratic Republic of Congo and chair of the G24, told a news conference.

“We should also take this opportunity, the opportunity of the increase in food prices, to obtain decreases in custom tariffs and subsidies on agricultural products and thus relaunch Doha (trade talks),” Mulongo added.

The G24 called on the IMF to help cushion economies from the impact of the subprime loan crisis and related financial troubles and said the fund “needs to urgently” improve its surveillance of advanced economies.

It said emerging markets and developing countries will need monetary and fiscal flexibility to soften the impact from exogenous shocks on their economies.

“Active policy coordination and international cooperation are critical to prevent the emergence of a larger crisis,” the G24 minister said.

They also expressed rising concern over higher food prices, which has pushed up inflation in many countries, prompting riots against the rising cost of living.

The G24 called on the World Bank to step up its policy and financial support to countries affected by higher prices, and for the IMF to stand ready to help countries with balance of payments needs through its Exogenous Shocks Facility.

The G24 also urged the IMF to approve, before the next IMF meeting in October, a facility that would give emerging economies access to pre-approved funding in the event of a financial crisis.

“Accordingly, to increase the relevance of the IMF in helping to address their risks, ministers called for a very substantial increase in regular cumulative access to IMF resources,” the G24 said.

The G24 also said a deal to increase the voting power of emerging and developing countries in the IMF was only a beginning to rebalance their representation in the fund.

The deal, which has been agreed by the IMF board but still needs the approval of all 185 countries, is likely to be approved in a vote this month.

Countries said that while it was the best they could get right now, they would keep pushing for more.

“The proposed package only begins to redress the fundamental imbalance in the governance structure,” the G24 added.

Developing countries also called for urgent action to address climate change, including efforts by major polluters in the industrial world.

“These cooperative actions need to be equitable, taking into account the low historical contribution and still much lower per capita energy use of developing countries and much more adverse impact on them from climate change,” the G24 said.

Mulongo said climate change required as much attention as the financial crisis. “We can no longer ignore the fundamental issues in attempting to find effective solutions,” he added.

Additional reporting by Paul Eckert; Editing by Chizu Nomiyama,

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