As finance ministers gather for the annual meeting of the International Monetary Fund, the Reagan administration is about to lose this country's last chance to get political credit for a solution to the international debt crisis.

Since 1982 the debt burden on developing countries in Latin America and the Philippines has condemned most to falling standards of living, plummeting real wages and little or no net investment. The collapse of markets for U.S. goods in developing countries and the need for these nations to export at any cost has sentenced more than 1 million U.S. workers and farmers to unemployment lines. The failure to resolve the dilemma has needlessly prolonged doubts about the stability of many U.S. banks.

The solution is targeted interest-rate relief and partial debt cancellation -- for debtors who implement growth-oriented reforms. Creditors should offer relief. For many debtor countries politically risky reform programs that make the economy more efficient and more equitable are the one chance for economic recovery and democratic renewal. But the reformers need a partner for growth. There are some reformers to whom creditors should offer deep interest-rate relief on all debt for several years. For others, a part of the debt should be cancelled. There may even be some reformers who deserve both some interest relief and partial debt cancellation.

Why is relief in exchange for reform the only and inevitable solution?

It is the usual and practical way serious debt problems have been resolved by lenders and borrowers. Debt relief is the basis of U.S. bankruptcy law, which stands as the model for all nations. If I can't pay my credit card bills, my bank cuts its losses; it doesn't increase my credit line. Banks that lend countries money solely to pay interest sentence themselves and their borrowers to a stalemate. The credit line increases every month, but the debtor gets no closer to growth and the bank no closer to repayment.

It may be the only way to avoid world recession. The United States cannot continue to provide the market for world economic growth without becoming overindebted itself. As the United States buys less from debtor countries, those countries will no longer have enough dollars to pay interest. Japan's rapidly aging population may stimulate demand for the health-care business but not for other goods in the world market. Germany's declining birthrate means it will buy less from the rest of the world. The explosion in Latin labor forces -- Mexico's work force will increase 50 percent by the year 2000 -- and their need for job-creating investment must sustain world growth in the coming decade. But Latin countries and the Philippines can't invest enough for growth and job creation while at the same time servicing debt at the rate of 7 percent of GNP.

It is smart politics. Debt relief allows fledgling democracies to spend money on infrastructure, health and education instead of just servicing, with money gotten from the sweat of a free people, the debt of a former military dictatorship. No opposition party can assail a leader who makes tough choices toward reform if the choices bring debt relief from creditors. On the other hand, the government that blindly reduces living standards upon policy advice from creditors while piling new debt on old begins to look like the juntas that accumulated so much debt in the first place. Governments with no alternative to new loans for paying old debt will abandon reform rather than become easy targets for opposition parties.

It is sound banking practice. Emergency loans contaminate banks' books. They finance interest payments instead of factories or farms, and they widen the gap between a bank's paper claims and the real value of its holdings. People who advocate new loans to pay interest on existing debt seem to be arguing that if we make the problem worse, it will go away.

Industrial countries see their exports continue to drop as the United States remains wedded to a policy of new loans. Indebted developing countries ask whether patience is really a virtue when the United States urges nothing more than a decade of recession. When the U.S. trade deficit diminishes in real terms, as it will necessarily, the problem can only worsen. Nobody outside the United States and few within it believes that current policies will resolve the problem; they only postpone the day of reckoning, and do so at great human cost.

Like the economies of debtor countries, the world's financial system needs a breath of fresh confidence. Only interest-rate and debt relief will bring the necessary reforms in debtor countries. Consider what would be possible in three of the smaller debtor nations if America would lead.

The Philippines, our ally through the better part of a century, must deliver on its long-delayed promise of economic opportunity for all Filipinos. There is no way the Philippines can restructure its economy and meet all its debt obligations. Without restructuring, long-term military security in the Philippines will become extremely difficult to attain. Creditors should say up front how much relief they could provide to enable the Aquino government to lay the foundations for broad-based economic growth. The administration should coordinate and lead that effort.

Ecuador, a country that has followed responsible policies throughout its recent economic troubles, gets little help from its creditors. Before the government leaves office next January, its creditors should offer the relief that the country's sound policies have long deserved. If we fail to do this, we necessarily teach other Latin governments the lesson that sound policy doesn't pay.

Costa Rica continues its long democratic tradition on an isthmus in crisis. It is a bitter irony that the burden of Costa Rica's debt could destroy Costa Rica's relative calm without any provocation from neighboring Nicaragua. In the past, its creditors have refused even to consider Costa Rican proposals for debt relief. If they do not soon offer relief they cannot expect the government always to value negotiation above unilateral action.

The problem of Third World debt is not an esoteric discussion accessible only to bankers and academics. Third World debt at its present level and interest rate creates poverty and destroys American jobs. As debt services blots out investment opportunities in the Third World, the risk of global recession grows. The administration policy is no solution. If it continues, the credit for finding a solution to the debt crisis may go to Japan, Britain or even Brazil, and with it, some indication of world financial leadership. Will America provide the leadership required to fight poverty and support democracy, or will we hesitate until the weight of the problem forces an outcome upon us? Change is inevitable. We can control it and lead, or we can react to it, and follow. It is our choice.

The writer is a Democratic senator from New Jersey.