American efforts to get the International Monetary Fund to refrain from issuing any more paper credit gained partial but important backing yesterday from other leading world powers, caucusing here just before the annual meeting of the IMF and World Bank, which starts Tuesday.
The U.S. stance, announced last week by Treasury Secretary Donald T. Regan, calls for the IMF to toughen its lending conditions, to give up plans to borrow money in the private markets and to refrain from any new issue of a paper credit, known as special drawing rights, or SDRs.
Regan also said the United States wants the World Bank to tighten up, and to rely where possible more on the private sector than government-to-government loans.
The poor nations, speaking through a committee known as the Group of Twenty-Four, said the international monetary system penalizes the less fortunate nations. In the face of clear American opposition, they called for even greater concessional aid from the World Bank.
This has set the stage for a bitter confrontation with the poorer nations, one of whose leading spokesmen said here over the weekend that if the IMF knuckles under to U.S. pressures the less developed countries might pull out of the IMF.
Support for the U.S. position came on the question of SDRs, which are issued from time to time by the IMF to its 141 member countries. The United States contends that such an expansion of credit is not needed and would be inflationary.
This conclusion was endorsed by a cluster of rich nations known as the Group of Ten, which met yesterday to seek common positions before the Bank-IMF conference.
The Group of Ten also backed, inferentially, the U.S. view that the IMF should not borrow in private markets. The IMF might need to borrow more money in the next few years, the rich nations said, but "in this connection, the ministers and governors reaffirmed their view that the cooperative nature and monetary character of the fund should be preserved."
On the question of the looseness or strictness of the IMF loan conditions, the Group of Ten used inconclusive language. But in view of the intense interest generated in the subject by Regan's statement's last week, today's communique of the policymaking Interim Committee, which represents the IMF, is awaited with great interest.
The Interim Committee, chaired by Canadian Finance Minister Allan MacEachan, yesterday began a two-day session, a regular prelude to the annual meetings.
On the world economic outlook, the Group of Ten nations said that, despite concerns over rising unemployment in the industrial nations, it would not be wise to move to expansionary policies until inflation is under better control. This, too, is diametrically opposed to the poor nations' views.
The Group of Ten conclusion on SDRs was a bitter blow to the poor nations. The communique of the Group of Twenty-Four, issued late Friday night, had assailed the policies of the United States and other industrial nations, and had demanded an annual issue of nearly $15 billion worth of SDRs. The communique said the rich nations' attitude symbolized their "insensitivity" to the plight of the poor.
The suggestion that the less fortunate nations might have to consider withdrawing from the IMF came from the chairman of the Group of Twenty-Four, Cesar Virarta, prime minister and finance minister of the Philippines.
The American position on SDRs, and against the IMF's borrowing from private markets, also was endorsed by Japan, Britain, Germany and France, who meet secretly from time to time as the Group of Five.
At such a meeting Friday, a dinner hosted by Regan, the Europeans also took occasion to reiterate their opposition to high American interest rates.