WASHINGTON - IMF managing director Dominique Strauss-Kahn said Thursday the organization would play a key role in confronting a global financial crisis that is punishing the world economy.

Strauss-Kahn said the global financial turmoil that originated in rising defaults in the US on subprime mortgages and roiled markets in August was the biggest financial crisis since the Great Depression of the 1930s.

"But it is a new kind of crisis," the International Monetary Fund chief said at a news conference.

Strauss-Kahn, who took the reins of the 185-nation institution in November, said the crisis shows above all the need for analysis of the links between the financial sector and the real economy.

And the IMF is "one of the rare" institutions" that can address the two sides of the problem, he said.

He said it was "unfair" to blame the IMF for deregulation in the financial sector that had fueled the crisis, saying that many countries had accepted the IMF's Financial Sector Assessment Program to help promote sound financial practices.

"What is interesting is that until a few weeks ago the United States did refuse to have the FSAP in their country," he noted.

The IMF painted an increasingly grim picture of the direction of the world economy Wednesday in its semiannual World Economic Outlook (WEO) report.

Global expansion is set to slow to 3.7 percent in 2008, half a point lower than its January estimate, and the world's biggest economy is likely in a "mild recession" stemming from a housing meltdown and will stagnate through much of 2009, the IMF said.

The WEO report drew immediate fire from US President George W. Bush's administration as "unduly pessimistic."

Responding to a question suggesting the IMF was lax in warning about the subprime crisis, Strauss-Kahn acknowledged it "probably not vocally enough" explained the risks in its a report a year ago.

"The point is that the Fund was not able ... to have people listen to what the Fund is saying," he said.

All this, he argued, points to the relevance of the institution.

"The IMF is back," he said.

"The debate is organized around our forecast or our policy advice," he said, speaking ahead of the IMF and World Bank spring meetings this weekend in Washington.

Established to promote global financial stability 64 years ago, the IMF finds itself out of step with the times and strapped for cash as countries shun its lending that carries what critics say are overly severe conditions.

Strauss-Kahn took office promising to restore its relevance, credibility and ailing finances.

The IMF board recently approved a series of reforms, ranging from creation of a new voting rights system that gives more voice to developing countries to a sharp budget cutback and the sale of 403 metric tonnes of gold reserves to replenish coffers.

The reforms, which require approval of 85 percent of the IMF's voting power to be adopted, "will be a real big success for the institution," Strauss-Kahn said.

The IMF chief warned of trade imbalances being created by soaring food prices, particularly in Africa and Asia.

"We will have to consider the effect of food prices not only to try to address this increase, to address the consequences in terms of alleviating poverty ... but also to address this problem in terms of imbalances, a new kind of imbalances," he said.

Oxfam, the anti-hunger organization and a critic of the IMF and World Bank, said the IMF should only work in African countries when asked.

"The time is right for the IMF to acknowledge that where these countries are macroeconomically stable, it should withdraw," said Elizabeth Stuart, an Oxfam spokeswoman.

"There are very serious shortcomings in the Funds performance in poor countries and a worrying lack of clarity about the direction that the Fund will take in the near future."

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04/10/2008 19:34 GMT