MANAGUA, March 6 (Reuters) - The head of the Inter-American Development Bank said on Friday the regional lender needs to increase its capital as it expects demand for loans in Latin America and the Caribbean to surge this year.

IADB President Luis Alberto Moreno said the bank would discuss the issue with its members at its annual meeting in Colombia at the end of the month.

"In order to meet the region's needs in a competitive and affordable way for our countries, the bank needs a bigger capital base," he said at a meeting in Nicaragua of the members of the IADB's board of governors from Central America and the Dominican Republic.

Moreno told Reuters in February that demand from Latin American countries for IADB loans could reach record levels this year as the global financial crisis and U.S. recession reverberate across the region.

He said then that the bank, founded 50 years ago, was ready to lend up to $18 billion this year, including $6 billion from an emergency liquidity fund created last year as the crisis spread.

Central America and the Dominican Republic are being hit hard by the U.S. recession, according to the IADB. Migrant remittances are down and a drop in U.S. demand is causing job losses in the textile and manufacturing sectors.

The IADB is due to hold its annual general assembly from March 27 to 31 in Medellin, Colombia. (Reporting by Ivan Castro; Editing by Bill Trott)

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