The Reagan administration, increasingly concerned by failure to bring the world debt crisis under control, is mapping a new strategy that would give the World Bank a larger role in aiding debt-burdened nations while reducing the power of the widely resented International Monetary Fund (IMF).
The purpose is to more effectively help countries in Latin America and elsewhere pay their debts and make major economic reforms while achieving the economic growth necessary to avoid domestic political upheavals.
The plan has been approved in principle by Secretary of State George P. Shultz and Treasury Secretary James A. Baker III.
While stressing that it will take weeks, or even months, before the full dimensions of the plan are worked out, officials said that Shultz in particular is convinced that current efforts to arrest the 3-year-old debt crisis are not working and that new steps are required.
U.S. officials expect the plan to be controversial because it would require substantial new contributions to the World Bank at a time that domestic spending cuts have made Congress and the American public reluctant to divert more money to multinational lending institutions. Officials are reluctant to discuss the plan, partly because of unresolved disagreements about how far it should go.
Underscoring the administration's sense of urgency was the disclosure Thursday that Mexico, long considered the model debtor nation, has been cut off from further IMF aid temporarily because internal political factors caused the government to relax austerity measures. Details, Page D10.
U.S. officials also are concerned that Latin American nations, whose collective foreign debt of $360 billion represents the biggest part of the problem, might use the U.N. General Assembly meeting next week in New York and the IMF's annual meeting in Seoul next month to stage a revolt against the monetary fund's dominant role in managing the debt crisis.
The first speaker at Monday's opening session of the General Assemby will be President Jose Sarney of Brazil, the world's largest debtor nation with a foreign debt of $100 billion.
He is expected to declare that the burdens of meeting Brazil's interest obligations are subjecting the country to intolerable political strains that threaten its recent return to democracy after two decades of military rule.
Also speaking at the United Nations on Monday will be Alan Garcia, Peru's new president, who is expected to repeat his call for Latin American countries to bypass the IMF and join together to force a confrontation with American bank creditors.
In an effort to address this unrest, the scheme being worked on by the administration envisions as its central feature a shift from the traditional U.S. policy of encouraging debtor nations to rely almost solely for relief on the IMF, whose loans are intended to help solve short-term balance-of-payments problems.
The chief complaint of recipient governments is that they must adopt stringent austerity measures to qualify for IMF credits but are restricted from using the loans for long-range, employment-creating development that would ease the popular discontent caused by austerity.
To counteract that problem, the administration's evolving plan calls for expanding the role of the World Bank, whose function is to further development of Third World economies.
Specifically, U.S. officials said, the administration tentatively proposes suspending the current limits on World Bank lending of roughly $13.5 billion so that it would be able to make more loans to debt-burdened countries.
The United States also wants to reorder the bank's lending priorities to permit more so-called structural adjustment loans.
Such loans are intended to help recipient countries make major changes in the basic structure of their economies, such as shifting or diversifying their traditional industrial or agricultural bases.
Like IMF loans, they can be used for balance-of-payments financing, and they also are granted on condition that the recipients follow tough austerity policies.
But they do not have the short-term restrictions of IMF credits and would permit recipients greater flexibility in using them for long-term development.
In addition, the administration is seriously considering the idea of trying to induce private banks, which have halted significant lending to areas such as Latin America, to get back into the market by having the World Bank guarantee parts of new loans to developing nations.
Such a move would follow the pattern of a recent $1 billion commercial loan to Chile that was made possible only after the World Bank agreed to guarantee $150 million of the amount put up by private lenders.
All these ideas have a built-in potential for controversy, which reportedly has made them the subject of lively debate in the administration.
Raising the ceiling on the World Bank's lending limits without increasing its capital resources would require approval by the other industrial nations that are the bank's principal shareholders, as well as their agreement to contribute to increases in its depleted capital at some future time.
Some U.S. officials, reportedly centered in the Treasury Department, are understood to feel that putting too much stress on getting an influx of new capital into debtor countries could divert them from the continuing need to pursue such austerity measures as reducing government spending and subsidies, restricting unnecessary imports and getting rid of costly and inefficient state-owned enterprises.
The biggest problem, the officials stressed, will be to persuade Congress and public opinion that making unspecified but unquestionably large new contributions to the World Bank is not just another futile attempt to help countries that are unable to manage their economies or a bail-out scheme to enable the big private banks to collect their outstanding loans.
The administration's plan is geared primarily to the needs of Latin America, whose countries have the most developed economies in the Third World and which theoretically could benefit most from a greater World Bank role.
However, the officials said the administration also is working on a companion plan to help the world's poorest countries, principally in Africa.
That scheme, which could be unveiled at the Seoul meeting, would call for the World Bank to put some of its resources into bolstering a $2.7 billion IMF trust fund, earmarked for helping the poorest countries over the next five years.
The World Bank and the IMF then would cooperate in jointly administering the fund to ensure that it was used to the maximum degree possible to foster long-range development in recipient countries.