Gordon Brown, chancellor of the exchequer, secured the backing of Saudi Arabia during talks in Riyadh at the weekend for the International Monetary Fund facility.

The UK said it would contribute $85m (€71m, £47m) to "kick-start" the fund, which will need $700m of financing from donor countries over five years. France and Saudi Arabia are expected to announce soon details of their contributions.

Britain, which is chairing the Group of Eight leading industrialised nations this year, has put poverty reduction at the top of the international agenda. The "shock" fund is intended to help poor countries deal with the effect of high oil prices, sudden changes in the value of their commodity exports, natural disasters and the effect of wars in neighbouring countries.

The IMF has long argued that low-income country economies are vulnerable to shocks and it already has mechanisms to help countries facing a sudden balance of payments crisis.

If the new facility gets support from enough rich countries it will enhance the IMF loans available to poorer countries and will lend on concessional terms.

Not every poor country would be expected to apply, however. As the IMF concluded in 2003, when looking at similar proposals, grant assistance is "generally more appropriate than fund loans" and "fund financial assistance would continue to be a relatively small part of the overall international efforts to address the effects" of such shocks.

Potential recipients might also be wary of applying for a loan in case it signalled that their economies were vulnerable. No countries adopted the idea of an IMF Contingent Credit Line a few years ago because they feared that applications to the IMF for assistance would scare off foreign investors.

The chancellor repeated his calls for other countries, including oil producers, to make contributions. He believes producing countries have reaped economic benefits worth $800bn over the last two years as a result of the oil price rise.

Meanwhile, ministers from the African Union are meeting UN officials in Tanzania in an effort to produce an action plan to alleviate the impact of swings in commodity prices on African economies. The Common Fund for Commodities, a UN initiative that helps finance farmers in poor countries, together with the private sector and non-government organisations, says about half all African countries derive more than 80 per cent of their foreign earnings from commodities.

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