Several industrial nations are pressing the United States to consider whether its debt strategy under increasing fire in the developing world needs to be strengthened monetary sources say. While few nations are ready to pour vast sums of money into radical debt relief style solutions to the debt crisis pressure is building for a greater International Monetary Fund role in the plan. But U.S. officials who are fighting off demands for change by Congress are confident they will retain support for their strategy which will probably be endorsed in a communique issued by the IMFs policy-making Interim Committee. One Reagan administration official said a recent discussion among leading industrial countries showed there was very broad and strong support for continuing the strategy. The official said in an interview I dont sense that theres a strong desire to revise the debt strategy except of course here on (Capitol) Hill. But monetary sources said some industrial nations like France and Italy are troubled by signs the strategy is increasingly strained. Britain too is said to be concerned. In late 1985 Washington called on multilateral development banks like the World Bank and commercial banks to increase loans to the 15 major debtors by 29 billion dlrs over three years. In return the major debtors were expected to undertake reforms promoting inflation-free economic growth more open markets and a reduced government role in the economy. The IMF was to retain a central role in the strategy shifting its economic reform programs from emphasizing austerity to stressing growth freer trade policies and foreign investment in debtor nations. But monetary sources said some nations want even more flexibility from the IMF when it sets economic programs tied to loans for debtor nations. Such flexibility would include less rigid economic targets -- which often lead to artificial crises when they are not met -- and more reliance on ranges and benchmarks to monitor economic performance. There is also concern that the level of IMF lending is too low and the commercial banks themselves under attack for tawdry loan levels to debtors want to see it increased. The IMF which holds its semi-annual meetings with the World Bank next week will only be a small net lender this year. Much of its loan disbursements are offset by repayments. Meanwhile most countries including the United States acknowledge the banks have not lived up to their commitments. Paul Volcker chairman of the Federal Reserve Board is particularly irritated with the reluctance of commercial banks to lend more to reforming debtors monetary sources say. New IMF managing director Michel Camdessus is understood to be worried about the Funds image in the developing world where it is often depicted as the source of economic ills. Camdessus experience as former chairman of the so-called Paris Club of western creditor governments has given him extensive first-hand experience of the debt crisis. Brazil which in February declared an interest paymernts moratorium on 67 billion dlrs of commercial bank debt has flatly ruled out adopting a program of IMF-sponsored economic reforms. Peru too has rejected an IMF program curbing debt repayments to 10 pct of exports. But the administration official said Brazils strategy of using a moratorium as a negotiating tool might backfire. Its probably turning out to be more complicated than they thought. It underlines the extreme risk that a debtor country takes on itself when it begins down that road the official said. Indeed U.S. banks are laying the groundwork for writing down their Brazilian loans. U.S. officials have generally praised most debtors for adopting genuine economic reforms and the multilateral institutions for stepping up their lending. And they point out that Venezuela Chile and the Philippines have struck agreement with commercial banks stretching out debt repayments. But problems still dog assembly of a 7.7 billion dlrs bank loan for Mexico which many officials acknowledge may be the last major cash loan for a debtor country. Instead banks are being pressed to come up with more novel ways of easing the liquidity squeeze in debtor nations. The prospect of greater official involvement in the debt strategy depends chiefly on the ability of western nations to come up with more finance. While there is sympathy in Congress for various forms of debt relief more U.S. funds for the World Bank or the IMF are a virtual impossibility in todays era of budget restraint. That leaves rich surplus nations like Japan and West Germany but neither country favors generalized debt relief. And the Reagan administration is not inclined to bow to Congressional pressure for changes in regulations governing foreign loans to make it easier for banks to account for delays in interest and principal repayments.
U.S. URGED TO STRENGTHEN DEBT STRATEGY