The call comes in the wake of the crises in emerging market economies and after the BBC found evidence in Russia of waste and theft of IMF grants.

Professor Richard Layard of LSE: 'There has to be a body like the IMF who can step in'

Mr Blair, currently chairman of the Group of Seven (G7) leading industrial nations, made the call in a speech at the New York Stock Exchange on Monday evening.

He said he would like to see "a new Bretton Woods for the new millennium".

The IMF and the World Bank were created in 1944 at a conference in Bretton Woods, New Hampshire, to help create a new economic order after World War II.

But critics contend they have failed to keep pace with dramatic changes in global economies.

Mr Blair said: "The current crisis illustrates the weaknesses of the existing international financial system."

One-year target

And he outlined five proposals for development over the next year and called for the personal involvement of heads of government to make the project work.

Mr Blair addressed 20 business leaders at the New York Stock Exchange

The prime minister said the organisation charged with overseeing the world's financial stability has failed in its mission over the last year.

He said: "We should not be afraid to think radically and fundamentally.

"The Bretton Woods institutions are now 54-years-old ... the current crisis illustrates the weakness of the existing international financial system. It needs to be modernised to meet the challenges of the new century ...

"We should set ourselves a deadline of one year in which this work should be done, so that we can have reformed institutions in place before the new millennium."

Merger idea

Downing Street sources say the spread of financial turmoil from Asia to Russia and Latin America shows the IMF and World Bank are not up to the job.

Blair to lead criticism of IMF

The Financial Times reports that Treasury officials will present a plan to merge partially the IMF and World Bank, force big private players like George Soros to be more open and accountable, and demand that nations publish their foreign currency exposures and long- and short-term debt positions each month.

Meanwhile, an investigation by the BBC's Jonathon Charles has revealed that Russia's chief auditor uncovered widespread abuse of IMF funding grants to the country.

Venyamin Sokolov, director of Russia's chamber of accounts, says that billions in IMF aid from the West was lost through corruption or used improperly.

The International Monetary Fund is considering whether to lend Russia another £3bn in the wake of the latest economic turmoil.

IMF impotence

However, the allegations involve funds for individual projects, not the aid sent to help the government re-establish financial stability.

This is important to remember in discussing any revamp of the IMF, said Professor Richard Layard of the London School of Economics.

He agrees on the need for an overhaul and says the IMF or a similar body must be able to stop the runs on currencies which precipitated the Asian and Russian crises.

He said: "The Russian government had less debt than the Maastricht criteria, no balance of payments problem, low inflation, an improving budget and it was all washed away in a run on the currency."