BANKERS CRITICIZE US DEBT STRATEGY

BANKERS CRITICIZE US DEBT STRATEGY

A worldwide banking group warned that banks would not put up money to back a U.S. plan to attack the Third World's $1 trillion mountain of debt unless changes were made.

''If they want us in the game, they better think about enhancing (its attractiveness)," said Barry Sullivan, chairman of the Institute of International Finance.His warning Thursday came as economic policymakers from more than 150 nations began arriving here for the semiannual meeting of the International Monetary Fund and World Bank starting Friday.

The institute, which counts most big banks as its members, complained that the world's 15 largest debtor nations were behind on their payments to the banks by more than $18 billion.

"Toleration of arrears to banks . . . weakens the (world's financial) system," said Mr. Sullivan, who is also chairman and chief executive officer of the First National Bank of Chicago.

Bankers are particularly incensed that the International Monetary Fund has pressed ahead with the new debt plan without waiting for developing nations to bring their payments to the banks up to date.

The year-old strategy, the brain-child of U.S. Treasury Secretary Nicholas Brady, calls for big reductions in the bank debt and interest rate costs of Third World nations in exchange for tough economic reforms.

U.S. policymakers have hailed the plan as a great success.

"We've made a real dent in trying to reduce the burden on Third World countries," Mr. Brady told a conference Wednesday.

Mexico, the Philippines and Costa Rica have been among the countries that have taken advantage of the plan.

But the institute argued in a special report issued Thursday that the IMF's tolerance of arrears weakened the strategy, discouraging banks and investors from providing Third World nations with the new money they need.

Horst Schulmann, managing director at the institute, said he saw no evidence that debt reduction either boosted a developing country's growth or improved its creditworthiness.