President Reagan, sharply denouncing the Soviet Union, said yesterday that he would propose modernizing the "old and deteriorating" equipment of America's international radio system to counter jamming by the Russians.

In a Rose Garden ceremony to proclaim "Captive Nations Week," Reagan said it was a "sad fact" that the Voice of America, Radio Free Europe and Radio Liberty "have been neglected for many years" and could be improved with "a relatively modest expenditure."

Neither Reagan nor his spokesman elaborated on how much he was proposing to spend.

Reagan said the cost to the Soviets of jamming broadcasts into communist countries is three to four times what the United States spends to transmit them.

"We can fully appreciate the fear of those who do not want the truth to reach the people of the communist world, those who are willing to violate flagrantly the Helsinki agreements or even to engage in terrorist violence to stifle the truth," Reagan said, referring to the 1975 agreement on human rights signed in Helsinki, Finland.

Reagan also condemned the Soviets for sparking a "wasteful arms race" and having its promise of a "classless society" turn into "decaying and crumbling dreams."

Communism, he said, has "meant forced labor and mass imprisonment, famine and massacre, the police state and the knock on the door in the night."

"We renew especially our hope," Reagan said, "that those countries of Eastern Europe, Asia, Africa and Latin America now under communist domination will some day regain their national sovereignty and, again, enjoy the dignity of their own national traditions."

As he spoke beneath a sweltering sun, Reagan was frequently interrupted by applause from guests, who included present and former members of Congress and American groups of European immigrants from the "captive nations," independent European states the Soviet Union swallowed up during and after World War II.

Reagan also announced that he had signed an "urgent" supplemental appropriations bill although he did not believe it went "far enough to reduce spending." He had vetoed two previous versions of the spending bill and thus, he said, "saved the taxpayers more than $3.6 billion."

Late yesterday, the president and Nancy Reagan honored the recently victorious Davis Cup Tennis Team and the U.S. Ski Team at a reception in the East Room.