(Refiles to correct date to Sept 19) By Peter Apps LONDON, Sept 19 (Reuters) - Iraq's humanitarian crisis is getting worse and more Iraqis are fleeing their homes despite the recent surge of U.S. troops, aid workers say, with donors reluctant to fund support for millions of displaced. Last week, President George W. Bush presented a relatively upbeat picture of conditions in Iraq and said forces could be cut by around 20,000 by next July. He linked the reduction to improvements on the ground particularly in Baghdad where the surge was centred and the volatile Anbar governorate. The United Nations estimates 4.2 million Iraqis have fled fighting and other violence, roughly half of them fleeing to neighbouring countries and half remaining displaced within Iraq. Most stay with host families and in inadequate accommodation such as schools or abandoned buildings but with increasing numbers in tented camps. Having taken so many, Iraq's neighbours have effectively closed their borders to new arrivals, complaining they have received little funding to help them cope with the influx. It remains one of the world's fastest-growing refugee crises, with almost twice as many of people displaced as by the conflict in Sudan's Darfur region. "Everyday life is a nightmare for Iraqis and that is why they flee," said International Committee of the Red Cross (ICRC) spokeswoman Dorothea Krimitsas. "It is very difficult to say what will happen but it looks very bleak. What we see is clearly a deteriorating humanitarian situation." In a report published on Tuesday and covering the first two weeks in September, the International Organisation for Migration (IOM) said improved security in Anbar and parts of Baghdad had resulted in a fall in the number of new families fleeing. But the overall number of displaced across Iraq continues to rise. "The overall numbers have never gone down -- they have always been rising," said IOM spokeswoman Jemini Pandya. "A lot of people have said they would like to get back but conditions do not allow it." BOTTOMLESS PIT? Waves of returnees were reported in the Anbar provincial capital Ramadi in early September due to improved security there, she said, but there were fears that might be reversed in the wake of the killing of a prominent Sunni Arab tribal leader who helped U.S. forces battle al Qaeda in Iraq militants. The withdrawal from southern areas by British troops had little impact, aid staff said, with displacement continuing. Across the country, the United Nations High Commissioner for Refugees (UNHCR) said the number of people fleeing their homes rose last month, with 60,000 reported newly displaced in August against 50,000 in July. "Many Iraqis are fleeing multi-ethnic areas before they are forced to do so," said UNHCR spokeswoman Astrid van Genderen Stort. "Children don't go to school any more, their parents often don't have jobs. More children are wandering the streets. Child labour is rising. You get children collecting garbage." Bombings of UN and Red Cross compounds in 2003 and the kidnap and murder of foreign staff left Iraq almost off-limits to relief groups, some of whom continue to try and work through local organisations or the Iraqi Red Crescent. Aid workers say displacement is spread across Iraq, with much of it taking place in the centre of the country. Some have fled north into Kurdistan, where they are easier to reach. Aid agencies complain that international donors -- including the countries that invaded Iraq in 2003 -- remain reluctant to fund programmes for Iraqi displaced or support countries such as Syria and Jordan to take refugees. IOM says it has only received $20 million of the $85 million it wants to aid the displaced inside Iraqi for 2006/7. "It's the fact that at the moment there is no light at the end of the tunnel," said IOM's Pandya.
