The International Monetary Fund, with full backing from the Reagan administration, has withheld $453 million in loans to the Philippines because President Ferdinand Marcos has refused to carry out promised economic reforms that threaten the interests of his close associates.
Disclosure of the new financial pressure on the Marcos regime came to light yesterday in a Senate hearing in which the administration's top Asian experts predicted "civil war on a massive scale" in the Philippines without "a comprehensive counterinsurgency plan" against the communist rebels.
Assistant Secretary of Defense Richard L. Armitage told the Senate Foreign Relations Committee that such a plan must combine political, economic and social reforms with a "new vigorous leadership" in a Philippine military purge of "overstaying generals."
Despite "some apparent progress" toward military reform and the government's ability to cope with the communist New People's Army insurgency, Armitage estimated that fighting within three to five years would reach "a strategic stalemate." That was defined by Assistant Secretary of State Paul D. Wolfowitz as "civil war on a massive scale."
"The progress toward reform," Armitage added, "though offering hope if vigorously pursued, is still insufficient to arrest the growth of the insurgency . . . The trend lines continue to point in the wrong direction, and the numbers of armed NPA guerrillas approach 16,500."
Wolfowitz and Charles W. Greenleaf Jr., an assistant administrator of the Agency for International Development, also disclosed that the administration -- as well as the IMF -- has increasingly resorted to economic muscle to force reforms on the Marcos regime.
However, the three administration officials argued against proposals by various Democratic senators yesterday to cut economic or military assistance to the Philippines as a signal of growing U.S. displeasure with the Marcos regime.
Wolfowitz also argued against an overly direct U.S. involvement in trying to force a change of government in the Philippines, saying "it's possible to intervene in a dramatic way and make the situation worse."
Nonetheless, committee Chairman Sen. Richard G. Lugar (R-Ind.) warned that "our patience is about run out" with Marcos. Lugar said the Senate wanted it known that it took "very seriously" the deteriorating situation in the Philippines.
He also warned of a "very adverse" reaction in Congress should Marcos carry through on his promise to reinstall Gen. Fabian Ver as chief of staff of the armed forces following Ver's expected acquittal on charges of involvement in the murder of opposition leader Benigno Aquino Jr.
Wolfowitz said the IMF had delayed disbursement of the third installment -- worth about $113 million -- of a loan until the Marcos government came to grips with "the difficult policy issue involved in reform of the coconut and sugar monopolies."
Wolfowitz said the Reagan administration had given the IMF its "strong support" in its efforts to break up the monopolies, which are widely viewed as being controlled by Marcos' political cronies.
"We have not yet seen any substantial reform implementation," he added.
The $113 million was scheduled to be disbursed Sept. 1. Because that installment is tied to a $658 million IMF loan made to the Marcos government in December 1984, the delay effectively halts disbursal of a $453 million payment, AID officials said.
An IMF spokesman said the fund is reviewing the government's performance in adopting promised reforms and had yet "to come to terms on criteria" with Manila before releasing any more money.
Greenleaf disclosed that the United States in September had withheld $19 million in development assistance for a rural farm credit program until Manila lifted restrictions on import licences for the private sector.
The Philippines had also nearly forfeited to the Sudan an additional $45 million in economic aid at the end of the last fiscal year because it initially balked at promised reforms in the wheat import sector, U.S. officials said.