July 30 (Bloomberg) -- The war in Iraq has prompted a humanitarian crisis for millions of Iraqis who've fled their homes or lack access to food and water, groups including the U.K.'s Oxfam charity said in a report.

Four million of Iraq's 27 million people are in ``dire need'' of food, said Oxfam and a panel of non-governmental organizations working in Iraq. More than 2 million are displaced inside Iraq, some before the fall of Saddam Hussein, and another 2 million have fled to neighboring countries, creating the world's ``fastest-growing refugee crisis,'' the groups said.

``The terrible violence in Iraq has masked the ongoing humanitarian crisis,'' Jeremy Hobbs, director of Oxfam International, said today in a statement on Oxfam's Web site. Oxfam and the NGO Coordination Committee in Iraq jointly published their report today on their Web sites.

Sectarian violence has raged in Iraq since the March 2003 U.S.-led invasion that toppled Hussein's dictatorship, causing people to flee the most violent areas. Iraq's Western-backed government and coalition forces have struggled to provide basic services such as electricity, food and water.

The number of Iraqis who don't have access to ``adequate'' water has risen to 70 percent from 50 percent before the invasion, the organizations said. Eighty percent lack basic sanitation. Almost half are in ``absolute poverty,'' while more than half are unemployed. Children have been hit hardest; child malnutrition rates have risen to 28 percent from 19 percent before the invasion, the organizations said.

Improvements Needed

``More does need to be done and we will continue to work with the government and others to improve the distribution of food, water, shelter and medicines,'' the U.K. Department for International Development said today in an e-mailed statement.

The U.K.'s humanitarian contribution to Iraq since 2003 is more than 125 million pounds ($253 million), including support for displaced people inside Iraq and refugees who have fled to neighboring countries, the department said.

The Iraqi government should decentralize the delivery of aid to enable local officials to distribute supplies, while foreign powers ``with capacity and influence,'' such as the U.S. and U.K., should provide advice and technical assistance to help the Iraqi ministries, Oxfam and the NCCI said.

Economic Development

The report showed aid to Iraq is being focused on economic development instead of on humanitarian assistance. Development aid from donors in the Organization for Economic Cooperation and Development increased 922 percent, to almost $21 billion, from 2003 to 2005, while humanitarian aid decreased 47 percent, to $453 million, during the same period, the groups said.

``International donors have been slow to recognize the scale of humanitarian needs,'' the organizations said. ``The international donors and UN agencies could intensify their efforts to coordinate, fund and deliver emergency aid.''

Such measures would alleviate, though not end, the Iraqis' suffering, the organizations said.

Oxfam and the NCCI called upon countries without troops in Iraq to donate money, because many humanitarian organizations won't accept funds from nations with armies engaged in the conflict. Nations without forces in Iraq include Belgium, Canada, France, Germany, Sweden and Switzerland.

NCCI comprises 80 international groups and 200 Iraqi organizations working in the country.

To contact the reporters on this story: Camilla Hall in London at chall24@bloomberg.net; Robin Stringer in London at rstringer@bloomberg.net.

Last Updated: July 30, 2007 13:01 EDT