An emergency funding scheme for countries plunged into economic and financial distress by the escalating global credit crisis has been activated by the International Monetary Fund.

The use of the emergency facility, for the first time since the Asian crisis of the 1990s, was ordered by Dominique Strauss-Kahn, the managing director of the IMF, and was the latest indication of the mounting fallout from the worldwide financial convulsions. The IMF chief said that the facility could make hundreds of millions of dollars available, if needed, to try to contain damage from the crisis. Since the Washington-based lender of last resort for governments had made few loans during the past five years, it had a large stock of financial ammunition that it could deploy to help nations cope with the present upheavals.

The scheme, mainly aimed at emerging market nations and poor developing countries, was created in 1995 as a way for the IMF to provide financial aid more swiftly to countries in distress, rather than going through more usual, bureaucratic and time-consuming procedures.

In the Asian crisis the emergency mechanism was used as countries from Thailand to Indonesia were battered by plunging currencies and stock markets, as well as by a flight of capital into safe havens in the developed industrial nations.

“I activated emergency procedures so the IMF can respond quickly . . . to be able to answer problems that may happen in some of the emerging countries,” Mr Strauss-Kahn told a news conference in Washington yesterday. “We are ready to answer any demand by countries facing problems.”

Mr Strauss-Kahn sounded a warning that “no country is immune” from the shock waves of the crisis. The credit crunch already being suffered in the developed West was now being felt in emerging market economies, and consumers and businesses were struggling to secure essential loans, he said. While two years ago, only a few countries were affected by the crisis, it had since infected nations worldwide, with only parts of Africa, notably West Africa, remaining untouched.

Mr Strauss-Kahn defended the IMF's forecasting record against charges that it had not anticipated the scale of the present crisis in its monitoring of economies worldwide, but conceded some criticism was justified of his own prediction in September that the financial crisis was close to ending.

“It is fair to say that all of us have underestimated the strength of the financial crisis,” he said. But he insisted that the IMF had rightly been among the most pessimistic world institutions six months ago and had been vindicated on that score.

He predicted that although present conditions were grave, and growing worse, next year would yield some improvement. He said: “It's a message of hope - the crisis is serious, the crisis is protracted, but the second half of 2009 will be the beginning of the recovery.” However, he conceded that this recovery would be slow.

Mr Strauss-Kahn's comments came as finance ministers and central bank governors from the G7 leading economies prepared for crisis talks in Washington today. The IMF chief said that although the world economy was on the cusp of recession, quick and forceful action could still end the crisis. The main task for ministers and officials meeting in the US capital this weekend was to restore confidence in global markets, he said, and he called for further co-ordinated measures by the authorities.

“All kinds of co-operation has to be recommended. All lonely acts have to be avoided, if not condemned,” Mr Strauss-Kahn said. He urged European Union countries to work together and avoid unilateral action.

“Co-operation and co-ordination in actions is the price of success,” the Frenchman insisted. “There's no domestic solution in a crisis like this one.” He added: “I know, having myself served as a financial minister of my country, how difficult it is in the European Union to make consensus and to make decisions. I don't underestimate the problems.”

Mr Strauss-Kahn served as a Socialist Finance Minister in France from 1997 to 1999.

But he went on to say that co-ordination “doesn't mean taking the same action in every country.

“You may co-operate and find out what you're going to do, discuss with your partners and the different members of the financial community, and then act differently because the situations are different.

“What we have to avoid is a decision made by some country without keeping the other countries aware of what they're going to do or listening to the spillover effect from one country to another country. That's one part of the co-operation which has to be improved.”

He said that concerted action by the G7 economies together was not sufficient, “even if it's initiated by a group of countries which are the most advanced or the biggest economies in the world, the G7 or the G8, without being carried on by all the countries”.

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