According to the International Monetary Fund biannual report, the US credit squeeze could cost more than USD 945 billion worldwide.

The IMF Global Financial Stability Report announced that the US housing market crisis has affected financial institutions in other countries, leading to global losses on a very large scale. It said that the credit crunch began in the US eight months ago after banks suffered huge losses due to rising defaults on sub prime or high risk home loans.

The report added that "The crisis is spreading beyond the US sub prime market namely to the prime residential and commercial real estate markets, consumer credit, and the low to high grade corporate credit markets.”

The report blamed the losses on a 'collective failure to appreciate the extent of leverage in the financial system and the associated risks of disorderly unwinding'.

The IMF also warned of the risk of 'a serious funding and confidence crisis that threatens to continue for a significant period', adding that non-bank financial institution losses around the world could result in a surge in its estimates.

The report comes ahead of a Washington meeting of IMF finance ministers and central back governors this weekend.