The IMF loan mechanism is likely to be employed almost immediately as part of an expected $30 billion rescue package for Brazil, the latest country to be pummeled by frightened investors.
"The world's leading economies have linked arms to contain the financial turmoil," President Clinton said at the White House. "This line of credit gives us a powerful new tool that can be used when it will do the most good."
Mr. Clinton said the joint statement, first announced in London by British Prime Minister Tony Blair's government, had been worked out in recent days through a series of telephone calls involving officials of the so-called Group of Seven countries, the world's largest economies.
The key element of the plan was a proposal Mr. Clinton put forward earlier this month. It would create a new mechanism, dispensing IMF contingency loans that could be tapped quickly to ward off the panic flight of investors trying to get out of a country ahead of everyone else.
U.S. officials believe if such contingency financing is made available it might avert the kind of panic that has already plunged a number of Asian countries into steep recessions and in August leveled Russia's economy.
In the joint statement released in Washington and other capitals, the G-7 countries endorsed "establishing an enhanced IMF facility to provide a precautionary line of credit that could be drawn on if needed by countries pursing strong IMF-approved policies."
The group also issued a joint declaration by G-7 finance officials that went into greater detail about how the plan would work.
The finance ministers said the new IMF loan window could be "drawn upon in times of need and would entail appropriate interest rates" and shorter time frames for repayment than the normal IMF loans.
One of the key demands that Congress made before approving $18 billion in additional U.S. resources for the IMF earlier this month was that IMF loans should be at interest rates higher than could be obtained from commercial banks in order to make sure nations do not try to tap the international resources too frequently.
While the joint G-7 statements did not specifically say that Brazil would be the first test case for the new procedure, the officials did have praise for the steps Brazil is taking to stabilize its economy. U.S. officials indicated the new mechanism will be employed as part of the Brazil support package.
The statements Friday were issued following a round of telephone diplomacy this week as Mr. Clinton called other G-7 leaders to round up support for his plan. When it was first unveiled earlier this month, the other nations promised only to "explore" the approach.
However, U.Sofficials continued to lobby for the new loan mechanism and resistance from other nations lessened after Congress finally approved the $18 billion U.S. contribution to the IMF. That is part of a global $90 billion package to replenish IMF resources depleted by more than $100 billion in bailouts put together since the currency crisis first erupted in Thailand 15 months ago.
Mr. Clinton discussed the joint statement in a 10-minute telephone call Thursday with Gerhard Schroeder, who took power Tuesday as Germany's new chancellor. Earlier, he had talked with Blair and Canadian Prime Jean Chretien.
Financial markets were disappointed that high-level meetings last month of G-7 finance ministers and central bank presidents failed to come up with a blueprint for dealing with the crisis. However, the officials issued a joint statement expressing their commitment to promoting economic growth to ward off a global downturn.
Investors have taken heart since then with an unexpected interest rate cut by the Federal Reserve on Oct. 15, the second that month, which was seen as a strong signal the Fed stood ready to move aggressively to keep the United States from dipping into a recession.
Written By Martin Crutsinger, AP Economics Writer