G20 to bulk up IMF in response to crisis

By David Ljunggren and Lesley Wroughton

LONDON (Reuters) - World leaders will triple the war chest of the IMF to fight the worst economic crisis since the 1930s and impose new curbs on financial markets, monetary sources at the G20 summit said.

The communique drafted for the meeting, obtained by Reuters, said leaders would submit large hedge funds to supervision for the first time and enhance regulation through a new agency and a beefed-up International Monetary Fund.

Stocks, battered by the crisis, rose on hopes a strong agreement would add to some signs that the downturn may bottom out. The index of top European shares was up 3.3 percent after Japan's Nikkei gained 4.4 percent.

Monetary and developing country sources said the latest draft summit communique provided for a $500 billion boost to the IMF's resources, raising to $750 billion the funds it can make available to countries worst hit by the global crisis.

"I think we are going to have some pretty impressive figures," British foreign minister and G20 envoy Mark Malloch-Brown told BBC Radio.

The IMF would also be able to borrow money on international markets if needed, the sources said. Another British minister said leaders would discuss possible sales of IMF gold reserves, which could raise yet more cash, although he did not expect an immediate decision on Thursday.

The G20 were also close to agreeing a trade finance package worth $250 billion to support global trade flows, a source at the summit in London told Reuters. Brown had been targeting at least $100 billion to help reverse the decline in trade following the credit crunch.

"This is a positive step to jump start global trade flows. It is a significant contribution toward solving the problem," said Eoin O'Malley, senior adviser on international trade at BusinessEurope, Europe's top business group.