THE INTERNATIONAL Monetary Fund (IMF) could sell bonds to developing countries to finance loans to member countries during the worst economic crisis in the 185-nation body’s history.

China, Brazil, India and Russia expressed interest in buying IMF bonds during the fund’s spring meeting in Washington at the weekend.

Member states were divided over the details, with developing countries linking the plan to a push for more influence within the IMF, where rich, developed countries dominate.

“I’m sure that this vehicle will be used,” said IMF managing director Dominique Strauss-Kahn. “Now we’re discussing with different creditors the way to implement it and the amount that we put in it.”

The IMF’s policy steering committee agreed on Saturday to a $250 billion (€189 billion) increase in the fund’s resources through “immediate financing” from members.

There was broad agreement on the need to reform the banking system in developed countries to ensure a sound basis for any global recovery.

“I think everybody again agrees that we need to do it now and that recovery is heavily relying on that,” Mr Strauss-Kahn said.

He said that member states agreed that they needed to borrow more to boost economic demand in the medium term but were divided on an “exit strategy” after the current crisis subsides.

“Some of us, including the IMF, are arguing that the stimulus is necessary, but at the same time, you need to have a view about what is going to happen in three years’ or four years’ time, and prepare the exit strategy from the stimulus,” he said.

European officials questioned the IMF’s estimate last week that European banks would have to write down $750 billion because of losses linked to toxic assets.

“With regards to Europe, because of the methodology, in our view we do not have an entirely convincing analysis,” European Central Bank (ECB) president Jean-Claude Trichet said.

The Taoiseach last week questioned the IMF’s estimate that the bank bailout could cost Ireland 13.9 per cent of GDP, a higher figure than any other developed country.

Mr Strauss-Kahn acknowledged that the IMF’s forecasts for economic growth were also gloomier than those of most national governments.

“Most governments’ forecasts are better than ours,” he said.

“Part of the recovery relies on confidence and it is absolutely normal that governments all over the world will try to rebuild confidence in looking at the upper part of the range rather than the lower bound.”

President Barack Obama’s chief economic adviser Larry Summers predicted yesterday that the US economy will continue to decline “for some time to come”, with a sharp fall in employment forecast for this year.

Pointing to depleted inventories, however, Mr Summers said the economy would pick up when manufacturers exhausted existing inventories and consumers started replacing aging cars.

“These imbalances can’t continue forever,” he said on Fox News television. “When they are repaired, they will be a source of impetus for the economy.”

Announcing a $55 billion infrastructure investment programme for developing countries, World Bank president Robert Zoellick said the global crisis was hitting the world’s poorest more than anyone else.

“As developing countries are facing the trials of the global economic crisis, it is vitally important that economic stimulus packages in the developed world are accompanied by support to those that cannot afford multibillion bailouts,” he said.

“A decline in infrastructure leaves weaker foundations for long-term economic growth that hits the poorest the hardest.”