The immediate challenge for policy-makers is to stabilize credit markets, while nursing economies through the global downturn and keeping inflation under control, the fund said.

IMF Managing Director Dominique Strauss-Kahn said more coordinated steps would be warranted to remove distressed assets from banks' balance sheets and to protect depositors.

"This is the right course of action in the face of the deflationary impact of the major financial shock in mature markets and against a background of declining inflation pressures," Strauss-Kahn said in a statement.

World Bank President Robert Zoellick said China's participation in the action was part of a process in which it was becoming a constructive stakeholder in the world economy.

Zoellick this week said the Group of Seven industrial nations was not broad enough to deal with the magnitude of the crisis, and called for a broader grouping of countries that included China and other emerging economic powers.

But Zoellick also said coordinated action was needed to help vulnerable, poor countries that will be hit by a crisis that was not of their own making. He said the World Bank had identified about 30 of these countries who would need help.

"We will play a role, but we need the developed countries to also act in a coordinated way to support that," he added.

US SCREECHES TO HALT

Meanwhile, the IMF said the US economy was screeching to a halt and warned a recession was increasingly likely.

For all of next year, it projects US growth of just 0.1 per cent. The near-term course of the US economy, the IMF said, will largely depend on the effectiveness of recent government initiatives to combat the spreading credit crisis.

... contd.