The International Monetary Fund will take a strong stand this week against a switch to economic expansion as a remedy for worldwide recession, arguing that a continuation of anti-inflationary policies is the only way of assuring "sustainable economic growth."
In the face of demands by Third World countries and several industrial nations for a return to stimulative policies, the Interim Committee--the IMF's top board--is expected to "stay the course" with emphasis on anti-inflation measures in its communique on Friday after a two-day meeting.
The finance ministers and heads of central banks representing 146 nations plan to argue that, although a world-wide recovery from recession is badly needed, there is little room in which the major nations can move to boost economic activity without renewing inflationary pressures.
"There is no magic wand that anybody can wave and create a reflationary policy. Things are much more complex than that," according to an IMF source.
The IMF will predict a modest 1.3 percent gain in the industrial nations' real gross national product this year, following a 0.3 percent decline in 1982. Next year is expected to be somewhat better, influenced by lower inflation rates and an expected further drop in oil prices.
The Third World countries, beginning their own two-day session today, have argued that the IMF is sticking to an outmoded script at a time when inflation is abating and debtor countries are in desperate need of a resurgence of growth among the richer nations who buy their products.
Some of them have been sharply critical of IMF Managing Director Jacques de Larosiere, who is regarded as a "hawk" on the anti-inflation policy. They argue that continued reliance on an anti-inflation strategy is incompatible with the strenuous efforts the IMF is making through its emergency loan policies to get the less-developed countries back on their feet.
But the "establishment" view at the IMF goes this way: Of the industrial countries that might lead an expansionary movement, France, Italy and Great Britain have to be excluded because they still have inflation and balance-of-payments problems.
Among the more successful economies, such as those of the United States, Japan and West Germany, the IMF conclusion is that there is not a "clear-cut case" for further expansion. In the United States, for example, the view at the IMF is that budget deficits are already too expansionary, and must be reduced substantially before the Federal Reserve can follow a more liberal monetary policy.
"If you look at it closely, nobody looks clearly to be a new 'engine' or 'locomotive' for growth," says an official.
Adding it all up, the Interim Committee thus is likely to recommend a better mix between fiscal and monetary policy that will allow a further reduction in interest rates, and reiterate past statements on the need to get rid of "structural imbalances" in labor markets and government regulations.
IMF officials plan to concentrate their efforts this week on getting a full 50 percent increase in the quotas, or deposits, by member countries that wouid raise the agency's capitalization to about $99 billion.
But there will be talk among the ministers on how to deal with some $50 billion in loans to smaller and hard-pressed countries that may not be paid back unless stretched out over a long period of time. Total Third World debt is estimated around $500 billion.
There is little concern at the IMF over the debt situation of three major borrowers--Mexico, Brazil and Argentina--who together owe about $200 of the $500 billion. Sources say that the IMF loan program for those three countries, along with the planned "adjustments" within those economies, is working "smoothly in the framework of IMF's classical approach."