The "paid-in" U.S. share of a general capital increase for the World Bank was reported incorrectly yesterday. It would be $416 million over several years. (Published 2/18/88)

Treasury Secretary James A. Baker III and World Bank President Barber B. Conable Jr. yesterday joined forces to launch a drive for a $75 billion infusion for the bank to enable it to increase its lending to Third World countries, especially "the poorest of the poor."

The U.S. share of the general capital increase (GCI) would be $13.87 billion, or 18.5 percent of the total. Of that, only $41.6 million, or 3 percent, would be an actual budget item, as "paid-in" capital, spread over five or six years. The rest would be "callable" -- available to the bank if some extreme need arose.

Baker and Conable were immediately warned by two key congressional leaders that the request will meet strong, but not necessarily fatal, opposition from a budget-conscious Congress. To succeed, they were told, the proposal will need bipartisan support and vigorous leadership from President Reagan.

House Majority Leader Thomas Foley (D-Wash.) and Rep. Richard Cheney of Wyoming, chairman of the House Republican conference, said Conable -- a former member of the House from New York -- would be a great asset in getting the necessary legislation through.

Baker, Conable, the two congressmen and other speakers addressed the annual meeting of the Bretton Woods Committee, a private organization formed in 1984 to provide political support for both the World Bank and the International Monetary Fund.

Baker also assailed critics of his 1985 proposal to manage the debt crisis -- the so-called "Baker Plan" -- who call for "large-scale, mandatory debt forgiveness schemes. To be direct, I believe that path leads both debtors and creditors off the cliff."

He said the only "viable long-term approach" to the debt problem remains his proposal for a case-by-case solution, based on economic reforms by the borrowers and expanded loans by commercial and multinational banks.

These principles, he said, are adaptable with any one of a "menu of financing" options that give banks and borrowers a number of alternatives.

But "this debt forgiveness approach is a mirage," Baker said, insisting that it would only accelerate the flight of capital out of the developing countries.

Along with Conable and Federal Reserve Board Chairman Alan Greenspan, Baker contended that the debtor countries continue to need an additional capital inflow, rather than debt relief.

Advocates of debt forgiveness or writedowns say borrowers need a reduction in their existing debt, rather than additional debt, in order to reduce their annual payments. But Baker said that even a big writeoff -- say 30 percent of the debt of the 15 biggest debtors -- would cut their annual debt service burden only $7 billion.

By contrast, Baker argued, the reduction in international interest rates since 1981 had saved these 15 nations almost four times that amount.

A general capital increase has long been sought by World Bank leaders, with support from most major nations, but had been opposed by the United States until last fall, when Baker announced that in principle the United States had decided it had become necessary to fund the growing needs of developing countries.

But additional money for the bank will not be the only contentious request for expansion of funds for the two Bretton Woods Institutions -- the bank and the International Monetary Fund. IMF Managing Director Michel Camdessus announced yesterday that his organization also "needs greater liquidity" and will soon be demanding at least a 50 percent increase in member-country contributions, known as quotas.

That would mean an increase of the equivalent of $60 billion, about a fifth of it from the United States over a period of years. The total would be double the $30 billion IMF quota increase in 1983 that touched off a bitter controversy before Congress went along.