WASHINGTON - THE International Monetary Fund called on Saturday for 'strong action' and 'close cooperation' to combat the financial crisis that is battering the world economy.

The IMF, wrapping up a meeting here, stressed 'the challenges facing the world economy are of a global nature, requiring strong action and close cooperation among the membership'.

The statement by the IMF's policy-making International Monetary and Financial Committee (IMFC) underscored that since its last meeting six months ago, global financial instability had increased, economic growth slowed and growth prospects for 2008 and 2009 deteriorated.

Complicating the economic troubles are escalating inflationary pressures.

'Inflationary risks - notably from higher food, energy, and other commodity prices - have also risen,' it said.

'The Committee agrees that policymakers should continue to respond to the challenge of dealing with the financial crisis and supporting activity, while making sure that inflation is kept under control.'

'While each country's situation is different, coherent action must be taken,' said the 185-nation institution, whose core mission is to promote global financial stability.

That action should be 'timely', it said, welcoming the recent moves by the central banks of the advanced economies to provide liquidity support to ease strains in the credit markets.

The US Federal Reserve, the European Central Bank and other central banks of advanced economies have pumped hundreds of billions of dollars into the money markets that seized up in August after rising defaults in the US high-risk subprime home loan sector.

The IMF called for 'continued vigilance' to deal with the financial turmoil.

'Further prompt actions by large financial institutions to disclose losses and repair balance sheets by raising capital when needed and mobilising medium-term funding will contribute to restoring confidence.'

The IMF hailed the ongoing work by groups such as the Financial Stability Forum (FSF) aimed at managing and drawing lessons from the financial turmoil.

That effort is 'a key step to strengthen the stability of the global financial system and to reinforce the supervisory and regulatory frameworks'.

Continued close IMF collaboration with the FSF, the Bank for International Settlements, standard-setting bodies, and national authorities will be essential 'to ensure that the lessons from the crisis are effectively shared and that agreed policy actions are rapidly implemented'.

The IMF also applauded the FSF policy recommendations adopted on Friday by the Group of Seven industrialised countries in hopes of improving transparency and resiliency in the financial markets within 100 days.

Regarding internal reforms, an issue that dominated the last IMFC meeting in October, the panel said it hoped governors would soon approve key voting and financial measures approved by the executive board.

The committee said it looked forward to approval of a reform of voting rights, long demanded by developing countries, by April 28, and a new income model that includes the sale of 403 tonnes of gold to raise cash, by May 5. -- AFP