Last February, a four-member field team was quietly sent from the International Monetary Fund to the Zambian capital, Lusaka, for discreet negotiations. The subject: the Zambian government's request for a $305 million emergency loan to save the country's credit by underwriting its heavy balance-of-payments deficit.

After 21 days of delicated discussions, Zambia had its money. But in return, Prime Minister Kenneth Kaunda had to promise to devalue his country's currency and slash govenment spending. The devaluation meant higher prices for imports, and the spending cuts meant reductions in income. The two action s lowered the Zambian standard of living, but the government had no choice. It was eithe accept the IMF's conditions or go bankrupt.

What occurred isn't unusual, but it serves to illustrate a point. The fund, a 130-nation organization whose job is to police the badly strained world monetary system, is gaining increased power and influence over its members' affairs - often, in the case of weaker nations, to the point of setting the terms of their domestic economic policies.

Besides the Zambia case, the fund has foreced stringent austerity measures in 21 deficit-plagued nations over the past several years. In 1974 and 1977, it issued new lines of credit to Italy and the United Kingdom. In June, it approved a loan to Jamaica. And now, IMF officials are in the midst of negotiating with war-torn Zaire. What's more, international experts say the fund's clout is growing almost daily.

The question is, how is the IMF's bureaucracy, housed in a bulky, atrium-topped building on 19th Street exercising its new power? Some critics say the fund is too arbitrary and inflexible - overly tough on developing countries, and insensitive to the "human" consequences of the belt-tightenig it prescribes for problem-ridden nations.

Indeed, fund-mandated government austerity programs recently led to rioting in Peru and Egypt, with residents protesting their leaders' decisions to raise domestic prices. And diplomats from some developing nations regularly grouse that IMF officials demand more of smaller countries than large ones. "If the big countires resist," says one, "the fund disappears."

The increased clout is a relatively recent phenomenon. Only a few years ago, the IMF's attempts to give countries economic advice were treated as little more than a gentleman's game. Fund field representatives held annual "consultations" with all member governments. But their urgings were takes with a grain of salt - particularly if the sitting government disagreed.

But now, with the past few year's dramatic changes in the world economic situation, the fund has become a power to be reckoned with. "These days," says one international economist, "when the IMF talks, more and more countries are listening." And so are private banks and other international lending institutions.

The big multinational banks, in fact, are among the big winners in the fund's hard-line approach. Although the money lent by the IMF ostensibly is for government-to-government balance-of-payments transactions, once it's in a country's hands it can be used to pay off loans to private banks if need be. And the IMF's policy prescriptions serve to guarantee the banks that the country will be a better credit risk.

The IMF's heightened new influence stems basically from two developments:

The sharp rise in oil prices the Arab nations engineered in 1973 has thrown more countries into deficit - and dependence on IMF loans to save them from bankruptcy. Since private banks reply heavily on IMF judgments - and backup - in their own lending to countries, the fund's pronouncements on policy have extra weight. If a nation wants the IMF's seal of approval, it has to toe the line.

The recent overhaul of the international monetary system has given the fund formal new authority to exercise "surveillance" over problem countries that have severe payments imbalances. While no one yet knows precisely how much power that entails, the charter revisions have given the IMF's recommendations increased status.

The fund's say-son over domestic economic policies of individual countries stems primarily from its power over its own purse strings - specifically, the conditions that are in difficulty over exceptionally large balance-of-payments deficits. (A country gets into deficit when its imports and investments abroad outstrip its exports and intake of capital.)

The IMF's role in the world economic system essentially is that of a policeman for the "haves" - other fund members, the nations that have lent money to financially troubled countries, and, indirectly, the large multinational banks. (The World Bank, the fund's sister organization, deals with helping the "have-nots" by offering grants or low-interest loans for economic development projects in poor countries.)

If a rich or poor nation get into balance-of-payments difficulty, the fund steps in - often as leader of last resort - with an offer to help bail out that government by providing a sizable line of credit. But the credit is hinged on the condition that the country adopt stringent fiscal and monetary policies designed to eliminate its payments deficit. The more a country wants to borrow, the stiffer the terms the IMF sets. Often, by the time a country seeks fund help, it's too late for anything but severe belt-tightening.

Fund officials argue that the trade-off is fair enough: Were it not for the IMF's underwriting, the individual nations would go bankrupt, and would have to impose much harsher austerity programs than those the fund insists on. Like a benevolent banker, the fund aims for gradually restoring economic health to the deficit country - not pay up on the spot.

Under the basic IMF loan system, nations may borrow up to 100 percent of their "quota," or membership fee in the fund, divided into four separate "tranches" or lending categories, each with a progressively tougher set of strings attached. There also are special longer-term lending pools from which members may borrow additional amounts.

It's the power to set conditions for making loans tht gives the fund most of its clout. The organization's charter is worded vaguely enough that officials are free to establish whatever terms they think are needed. Talks between the government and fund representatives often last for weeks. At the end, everything must be approved by the IMF executive board.

The results often are striking. In Zambia's case, for example, the government won a credit line of $305 million, but had to devalue its currency by 10 percent and sharply slash spending. Great Britain won authority to borrow up to $4 billion, but had to raise interest rates and pare spending. Jamaica received $244 million - after devaluing and promising to slow wage increases.

Moreover, the IMF continues to influence national policies even after a loan is granted, because the aid usually is only for a year or so and requires a "performance evaluation" for renewal. So, Jamaica this year had to renegotiate a new domestic economic program after its 1977 efforts failed to meet the fund's criteria. And IMF officials prodded Sri Lanka into its most sweeping economic reforms ever.

IMF authorities insist the fund doesn't "dicate" domestic policies to individual countries. In the first place, the terms it sets almost always are worded in the euphemisms of international economics, unlikely to offend any government. "We never ask a country to devalue its currency," an insider says. "We just agree on limits for net foreign assets of its central bank."

Secondly, fund negotiators almost always suggest several options for governments on each major issue. In the Zambian case, for example, IMF representatives suggested five or six approaches for achieving eachh economic goal, and then Zambian officials chose among them, based on domestic political considerations.

There's often been criticism that the IMF's judgments are made by staff, not political officials, meaning that a nation's policies, in effect, are determined by sometimes youthful economists who never have been elected to office. In essence, that critiicism is accurate. But often the IMF staff members are experienced. And in all cases, their work is reviewed by top fund officials and the executive board.

In the case of the Zambian negotiations, all four fund field team members were economists: a 40-year-old Italian, who has spent his career with the IMF and other international economic institutions; a 33-year-old Japanese economist; a 30-year-old Finn, and a 29-year-old London School of Economics graduate who has been at the fund seven years.

Their proposals, the result of weeks of work, were approved by Zambian policymakers and top IMF officials. The decisions at the Zambian end were made by the prime minister and finance minister.

William B. Dale, a former U.S. Treasury official who is the fund's deputy managing-director, insists that "the fund can't dictate a nation's domestic economic policy." Even if a country "agreed to whatever we suggested," he says, "it's they, not we, who administer the policy. They've got to become satisfied the policies are correct before they adopt them."

And Paul A. Volcker, former U.S. undersecretary of the treasury for monetary affairs and now president of the New York Federal Reserve Bank says the fund's analysts usually are right on target. "You can pick your individual instances where in hindsight there's been some problem," Volcker says, "but by and large the fund people do their jobs pretty well."

Still, in the end, even fund insiders agree, the bottom line is whether the deficit-plagued country wants the IMF's money and imprimatur. "The borrowing countries accept the terms because they need the IMF's Good Housekeeping seal of approval," says a U.S. official familiar with the negotiation process. "They know they can't function without it."

Adds one high developing-country policymaker involved recently in negotiating an IMF loan for his country: "It's just astonishing how much authority the IMF mission chief has. You're really dealing with a high-class bunch of people here, and on balance I'd have to say they were fair. But the staff has one hell of a lot of clout."

Fund officials deny the agency is more stringent with developing countries than with industrial nations - citing as examples recent demands on the United Kingdom and Italy. "It's fairly obvious we're not going to push big or small countries if they don't want to," one fund source concedes. "The difficulty is, the smaller countries are in financial trouble more often."

Nevertheless, as holder of the purse strings, the fund can get tough when it wants to. In ongoing negotiations with Zaire, a beleaguered Mobuto government already has agreed to give the IMF extensive influence over the country's economic policies as part of a $1 billion plan to bolster its shaky regime. There even will be an IMF "technical adviser" in the Zairian central bank.

And Robert Solomon, a former Federal Reserve Board international monetary adviser who now is at the Brookings Institution, suggests there may be some truth to the charges that larger countries - and those with balance-of-payments surpluses, which theoretically are supposed to be as bad as deficits - emerge less scathed.

"The fund may indeed have been too tough on some countries." Solomon says. "We seem to have fashioned a monetary system with the same old prejudices - that a deficit is bad but a surplus is good." He also is critical of the way IMF policy prescriptions are formulated: "You sometimes get the feeling that some pretty junior staff people are in effect mandating policy."

In any case, there seems to be agreement that the organization's demands are rarely really unfounded. As a U.S. official puts it, "The problem isn't the fund - the problem is the countries are in a bind and need to take orastic steps to get out. The reality is that the IMF loan makes it less painful for these countries to make their adjustments - even with the demands the fund makes."

The question is, how much is the fund's insistence an unwarranted intrusion on national sovereignty? While some countries go kicking and screaming to the IMF's bargaining tables, others seem to welcome the fund's toughness as a cover for imposing needed cutbacks they know will be unpopular. "The fund makes a terrific scapegoat," one policy-maker says.

In still other cases, the governments sometimes turn out to be too weak or ill-equipped to carry out cutback programs on their own. In Peru, for example, outside observers say it's unlikely the regime would have been able to slash programs without fund intervention. And onlookers say Zairian officials simply weren't technically able to develop their own programs.

At least some of the criticism over the way the fund treats developing countries may be reduced as a result of a new approach to IMF lending involving longer-term loans. Until recently, the major form of IMF lending has been to extend credit to a country for a year at a time. If the government did not perform as expected, the line of credit simply was canceled.

Under the new program, however, the fund now works out a longer term plan with borrowing nations designed to help restore the local economy over a three-year period.In the case of Jamaica, where Prime Minister Michael Manley has criticized IMF officials for not fully "understanding" poorer nations' needs, policymakers are viewing the new procedure as "a better tool" for the IMF to use.

What is less certain is how much influence the fund will be able to exert on nations that aren't actually trying to borrow money - such as West Germany, Denmark, or even the United States. Although the organization's newly revised charter grants it increased power in this area, the rules of the game haven't been drawn yet. "They're still feeling their way," a knowledgeable onlooker says.

Dale and other IMF officials insist that "we're taking to develop standards and procedures for policing countries that are not currently borrowing, but some observers are skeptical. "The fact is, they're just not going to be able to force any nation to make cutbacks if it doesn't need IMF money." one observer says.

The issue may be decided quickly, however, Jacques de Larosiere, the fund's new managing-director, was a coauthor (along with former U.S. treasury undersecretary Edwin H. Yeo) of the fund's new "surveillance" power, and is said to be taking a more aggressive stance than his predecessor, former Dutch finance minister H. Johannes Witteveen.

The fund's directors are appointed by the various finance ministries of the IMF's 130 member nations and take their policy instructions from their home governments. The voting power of the directors is weighted according to the size of the economy of the nation they represent.The U.S. director controls just under 21 percent of the votes. Zambia's ballot is counted in with those of several other American nations as a single regional vote.

In any case, the corner has been turned for the once-toothless IMF. To the officials in the Zambian treasury - and others in governments throughout the industrial and developing world - the fund now is a force to be respected. And for better or worse, analysts say that's unlikely to change very soon.

NEXT: Jamaica