The World Bank said yesterday that the Third World's total debt reached $950 billion at the end of 1985 and is expected to exceed $1 trillion this year.

The bank's report showed that Third World debtor nations paid about $22 billion more to banks and other lenders last year than they received in new loans. This occurred despite the postponement of a large part of the capital repayments through rescheduling of $93 billion of the total debt.

The outflow of cash from the Third World to the richer lending nations emphasizes the nagging nature of problems of the indebted nations. It also suggests why some critics say the Baker debt initiative -- which would pump an additional $29 billion into the key debtor nations over three years -- may be inadequate.

The bank said the 131 less-developed nations probably will owe slightly more than $1 trillion at the end of 1986. Of that amount, $815 billion will be long-term debt, of which about 60 percent will be owed to private lenders.

Most developing nations are included in the bank's tally, but with some significant exceptions, including China, South Africa, Iran, Iraq, Afghanistan and Vietnam.

Of the 107 countries on which the World Bank has the best data, net new long-term loans have fallen every year since 1981, when loans peaked at about $75 billion, the bank report said. Last year, new loans totaled only about $30 billion. During the same four years, interest paid rose from about $40 billion in 1981 to an estimated $50 billion last year.

Six months ago, Treasury Secretary James A. Baker III urged commercial banks to expand their loans by $20 billion, while the multilateral development banks would double their loans to $9 billion in this period. The borrowing nations would stress market-oriented economic policies.

The World Bank strongly endorsed the Baker initiative; but it warned that expansion of commercial bank loans "will not come spontaneously" for the middle-income, commodity-dependent debtors and the hard-hit African nations, as well as for the more-publicized borrowers, including Mexico, Argentina and other Latin American nations.

It suggested "a broader framework" is needed to manage the debt problem, which would involve "more explicit recognition by the industrial countries of the links between their own economic policies and the economic and financial health of the debtor nations."

The bank called for integrating "debt relief and new financing" with adjustment programs in the borrowing countries.

But World Bank Vice President Anne O. Krueger, responding to a press conference question, said conditions would have to get "much worse than we now think they are, and on a global basis," before the bank would support "radical" solutions to the debt problem, such as canceling part of the debt.

She said that would penalize those countries "that have done the most to maintain their creditworthiness."

In releasing the new data on debt, Krueger said the $22 billion outflow "preempted savings that would otherwise have been available for investment in the debtor economies, and restricted their ability to import the goods needed to sustain economic recovery policies."

For 17 big debtors that account for nearly half of the total money owed -- $446 billion out of the $950 billion at the end of last year -- the experience during the past four years has been negative growth rates for about half, and slow growth in the others. In all but two (Colombia and Jamaica), investment declined, and in 10 of them by more than 10 percent a year.

"These countries, and others, are in danger of being caught up in a vicious circle, one in which the weight of debt service obligations in the short term, by reducing investment directly, and also by deterring new capital flows, makes it more and more difficult to establish the conditions for growth needed to service debt satisfactorily in the longer term," Krueger said. To get around this Catch-22, Krueger said, the decline in financial flows must be reversed to countries that will agree to make effective use of the money, and that industrial countries must cooperate by stimulating economic growth and keeping their markets open.

She emphasized that, despite prospective increases in multilateral bank lending, there is no alternative to reliance on the private banks. In the case of the 17 major borrowers, 80 percent of the combined debt is owed to banks.

"They the banks have done an excellent job in rescheduling existng debt -- a job that is going to be needed for several years ahead -- but they have found it difficult to go further. More is needed, and the initiative must come from the official sector," she said.