Treasury Secretary Donald T. Regan told the International Monetary Fund bluntly yesterday the Reagan administration wants it to be stricter in lending money to the world's poorer nations, and at the same time warned the World Bank that it, and the nations it serves, must rely more for credit on the private sector.
The new policy, a reversal of the Carter administration's attitude, could eventually mean less credit for Third World countries. And if the international agencies adopt the more austere U.S. view, many will have to adopt less inflationary internal conditions, or look elsewhere for their borrowed money.
Because of stringent budgetary conditions in the United States, plus a basic preference for private rather than public credit, Regan warned that U. S. contributions to the international lending agencies would be limited in the future, and that they therefore had an obligation to make their available money go as far as it could.
Other officials, who could not be named, said the United States will demand that relatively well-off developing nations such as Argentina and Brazil "should be graduated" from the list of countries eligible for concessional aid from the World Bank, and forced to borrow at regular rates, while more affluent nations like oil-rich Mexico be encouraged to borrow in the private markets.
The Treasury boss also served notice to poor nations participating in the North-South summit at Cancun, Mexico, next month "that we're not interested in setting up a whole new framework for global negotiations. We'll be interested in hearing what they have to say, and pointing out to them the 'art of the possible.' "
Regan will outline the new U.S. "theme" on the Bank and the Fund in a speech to the joint annual meeting of the institutions, which begins in Washington a week from today. He said U.S. views had already been made known "to our major trading partners" who have not raised "much" objection.
Regan also said there is no convincing proof that the IMF should seek to borrow additional funds in the private market, as the agency was considering doing to meet a major expansion in demand for loans.
The secretary said that such IMF borrowing might "crowd out" private borrowers. He also told the IMF to abandon any notion for the time being of expanding its international paper currency known as Special Drawing Rights.
Regan observed that the IMF has been making large loans to some fairly advanced developing countries, "and they still have major problems, and we wonder why." The problems, he said, include continuing domestic and international deficits, failure to control their money supply and a general "inability to get their house in order."
Regan said that the United States "still has some questions" to ask about a proposed $5.5 billion IMF loan to India, which would be the all-time record IMF loan. "We don't think the IMF should become another IDA--a soft-loan window," Regan said. IDA is the acronym for the World Bank's concessional loan agent, the International Development Association, which makes loans for 50 years with a nominal service fee of 2 percent.
In general, Regan said, he United States wants the IMF to be somewhat tougher in lending money. Basically, the IMF is set up to make loans to ease nations over a balance-of-payments crisis, while the World Bank makes longer-term loans for development purposes.
"The IMF could be a little more strict," and insist on "more strict monetary and fiscal policies" from the borrowing countries.
"I'm going to explain to the annual meeting that here in the U.S., we have stringent budget limitations on what we can do and can't do for the LDCs Less Developed Countries through the multilateral institutions," Regan said, "and we must try to make the most efffective use of limited funds."
The World Bank, he said, "must make more use of the private sector" rather than dealing so exclusively on a government-to-government basis, he said. He cited as an example the Bank's proposal last year to set up an energy affiliate to finance development of petroleum and other fuels in the LDCs. "These can be developed by the private sector," Regan said.
The Reagan administration's attitude toward the World Bank has been made known before. It will be further developed in a detailed study of the Bank and regional development banks to be published in a few weeks. But the administration's critical attitude toward the IMF has developed more recently, possibly triggered by the enormous loan ticketed for India.