Washington: The world economy "continues to face a difficult period" and "near-term economic prospects have weakened," the Group of Seven advanced industrialize countries said, pledging cooperation to strengthen the financial system.

"The turmoil in global financial markets remains challenging and more protracted than we had anticipated," the G7 finance ministers and central bank governors said in a statement issued after their meeting in Washington yesterday.

The G7 finance chiefs noted that since their last meeting in February, there have been "sharp fluctuations" in major currencies. "We are concerned about their possible implication."

"We continue to monitor exchange markets closely and cooperate as appropriate," they said.

Major central banks have coordinated multibillion-dollar cash infusions into stressed financial markets in recent months and the dollar has plunged to record lows.

"In the context of a weaker economic outlook, financial markets confront the interrelated issue of: re-pricing of risk and significant de-leveraging; managing counterparty risks; accommodating balance sheet adjustments; raising capital; improving the liquidity and functioning of key markets," they said.

"We reaffirmed our strong commitment to continue working closely together to restore sustained growth, maintain price stability, and ensure the smooth and orderly functioning of our financial systems."

Source : PTI