With more than 1 1/2 years left in its $1.85 million fund-raising campaign, the Washington Opera yesterday announced it already has $1.7 million and will therefore raise its sights -- to $4.5 million.

The development represents a dramatic turnaround for the company, which was forced to cut back its 1985-86 season to five productions from seven because of a lack of funds and a $900,000 deficit.

Of the $4.5 million, $2.5 million would be used for a cash-reserve fund to provide working capital through the season. The company now has to borrow to develop productions while awaiting the income from ticket sales, a practice that results in large and unproductive interest payments.

Proceeds of the drive also will be used to eliminate the deficit -- another financial drain in the form of interest payments.

The new goal was announced at a press conference in the corporate offices of the Riggs National Bank, a major contributor to the campaign. Jackson B. Gilbert, vice chairman of Riggs and chairman of the campaign, said the campaign's purpose is "to provide for long-term planning and to permit the company's technical and professional level to continue to rise without being held back by financial restrictions.

"We must be able to plan three or four seasons ahead to get the kind of singers we want, and that is impossible if we don't know where the money is coming from," Gilbert said.

"Up to now," said general director Martin Feinstein, "when we plan a season, the question has been, 'Where are we going to get the money?' This affects our artistic decisions: Can we afford to develop a new production sets and costumes or should we borrow an existing production?" That question explains the absence of German opera from recent Washington seasons, he said.

"We did a study a few years ago and found that, over a five-performance period, the cost of doing 'Die Meistersinger' would be $500,000 more than 'Il Trovatore,' " he said. " 'Meistersinger' is a longer opera and requires more rehearsals, so the orchestra would cost more."

Opera board president Chris Hunter explained that the shortened season -- to 47 from 72 performances -- also has helped improve the opera's financial situation.

"Every time the curtain goes up, we lose money," she explained. "So we decided that the curtain would not rise as many times."

Board chairman David Lloyd Kreeger noted that tickets cover only about 40 percent of Washington Opera's costs (a higher average than most American opera companies), "so that every time a dollar is spent on tickets, somebody has to contribute a dollar and a half."

The opera, which has a $4.8 million operating budget this year, has had a 40 percent growth in subscriptions and a substantial increase in earned income as well as contributed income this year. With some major trimming of production costs, "We can now project a balanced budget for this season," Hunter said.

The three-year campaign began in June 1984 with a $500,000 challenge grant from the National Endowment for the Arts, which the opera was required to match on a 3-to-1 basis with new or increased contributions. Two major contributors were anonymous, but several large individual contributors were identified at the press conference, including Mrs. Donald A. Brown and Carl M. Freeman. The campaign also was aided by corporate underwriting from the Morris and Gwendolyn Cafritz Foundation and Pepco.

The next major financial project, if this campaign succeeds, will be to establish an endowment fund, Feinstein said.