DAR ES SALAAM (Reuters) - The world’s advanced economies are moving too slowly in ridding banks of problem assets, which could jeopardize a global economic recovery in 2010, the head of the International Monetary Fund said.

Dominique Strauss-Kahn, Managing Director of International Monetary Fund (IMF), speaks during a news conference in Kuala Lumpur February 7, 2009. REUTERS/Zainal Abd Halim

The warning by IMF Managing Director Dominique Strauss-Kahn comes as the Fund now believes the global economy will be gripped by a “Great Recession” in 2009 and contract below zero.

In January the IMF said world growth will come to a virtual standstill this year at 0.5 percent, but Strauss-Kahn said just over a month later the IMF had to cut that forecast following worse-than-expected fourth-quarter data.

Strauss-Kahn said on Wednesday the IMF is still projecting the world economy will recover from mid-2010 but only if governments move quickly to implement stimulus measures and banks’ balance sheets are cleared of toxic assets.

“On the (bank) restructuring side things are really lagging,” Strauss-Kahn told Reuters in an interview after an IMF conference on African economies. “If it goes that way for two or three more months then recovery in 2010 will be difficult.”

Extra writedowns and a large U.S. tax fine forced UBS to revise up its 2008 net loss, the biggest in Swiss corporate history, the bank said on Wednesday, after it had earlier received a state subsidy.

And news of an asset insurance scheme in Britain has been coming out piecemeal in the last few days, as the country aims to limit losses banks face on troublesome assets.

The new U.S. administration has outlined a plan to remove toxic assets from banks’ balance sheets. “The U.S. needs to say exactly how they’re going to do it,” Strauss-Kahn said.

He said he would take this message to a meeting of Group of 20 finance ministers in Britain on Friday and Saturday.

U.S. Treasury Secretary Timothy Geithner on February 10 outlined the bank plan, but offered few details on how it would work.

Since then, the Treasury has agreed to a third rescue effort for Citigroup by agreeing to convert preferred shares to common equity, bolstering the bank’s capital base.

Limiting the losses of banks and insurers on risky assets is widely regarded as the key next step to restoring confidence in the financial system.

MORE STIMULUS

Strauss-Kahn said actions by various governments to stimulate their economies had been more coordinated and responsive although he said “there is still some room to have some more stimulus.”

The IMF has proposed that governments that can afford it should act together to roll out a global fiscal stimulus equivalent to about 2 percent of world gross domestic product (GDP) or around $1.2 trillion. Currently total fiscal stimulus plans amount to around 1.5 percent of world GDP.

The IMF chief also said he was concerned with the spread of the global crisis to emerging market economies, hit by the sharp drop in demand and prices for commodities and drying up private capital flows.

He said he was concerned large banks and corporations in emerging markets will be unable to rollover maturing debt.

Preliminary estimates by the World Bank this week show that well over $1 trillion in emerging market corporate debt and $2-3 trillion in total emerging market debt mature in 2009, the majority extended by international banks across borders or through their affiliates in emerging markets.

Most of this lending is in foreign currency, and for relatively short terms, meaning that the currency and maturity risks are primarily on the balance sheet of emerging market banks, companies and households.

With increasing trouble brewing in emerging markets, Strauss-Kahn said it was necessary that IMF shareholder nations agree to double IMF’s resources by $250 billion to $500 billion, including the $100 billion committed by Japan.

While Strauss-Kahn declined to give the IMF’s estimates on rollover needs, he said: “When you look at the figures for 2009 financing needs of emerging countries and what we expect to be covered by rollover ... the gap is huge. Everyone understands we need to have a sharp increase in our resources.”

The IMF has already provided $50 billion in emergency financing packages to struggling eastern European countries, including Hungary, Latvia, Ukraine, Belarus, Serbia as well as Pakistan and Iceland as the crisis spreads.

Also recently, the IMF projected that 22 developing countries faced a financing gap in 2009 of up to $25 billion, which could reach as much as $140 billion.