BARBER CONABLE, president of the World Bank, was at first a little reluctant to talk about the third-world external-debt problem. ``Debt is not the central issue,'' says the head of an institution that, with its affiliates, made some $20 billion in development-loan commitments last year. He sees the bank's greatest goal as alleviation of poverty: 90 million poor people in Latin America, where debt impedes economic growth; 280 million ``absolute poor'' in Africa, where the need is for more schools, roads, and other infrastructure; and 600 million in Asia where debt is not a serious problem.
Nonetheless, the World Bank and its sister institution, the International Monetary Fund (IMF), are expected to play a key role in the revised United States strategy for dealing with the $1.2 trillion in developing-country debts owed to the commercial banks and governments of industrial nations.
That altered strategy, outlined March 10 by Treasury Secretary Nicholas Brady, envisions three ways to reduce the debt burden of debtor nations. In one case, bank loans would be swapped for ``exit bonds'' of lower face value. The banks would take a loss on a portion of these loans. In a second case, bank debts would be traded for similar bonds, but with equal face value and a lower interest rate. The banks would lose on interest payments. Third, debts could be swapped for part ownership of businesses in the debtor nation.
How the bank and IMF will be involved in this process is not entirely clear. Bank officials expect details of the Brady approach to be fleshed out by precedents to be set when the debts of individual countries are rescheduled. The primary candidate for a test of this approach is Mexico with $102 billion in foreign debts.
Mr. Conable spoke just before Secretary Brady last Friday at a meeting of the Bretton Woods Committee, saying: ``A good place to start would be with Mexico. Mexico has indicated a willingness to engage in major reform, it has substantial prospects but substantial debt, and it has lived up to its obligations.''
In an interview here, he said, ``There's interest on all sides in letting the thing evolve some, in trying to include debt-reduction components in the workout schemes that we are trying to put together for these countries.''
Since the US federal government with its huge budget deficit finds itself in no position to accept any transfer of loan losses from the commercial banks, it will expect the World Bank, the IMF, and the Inter-American Development Bank to help in rescheduling deals. These institutions most likely will guarantee some ``exit bonds'' or a portion of new commercial bank loans that such debtor nations as Mexico need to assure future economic growth.
These multilateral institutions will also be expected to inject money into the debtor countries with what are called ``adjustment loans.'' These are not tied to any development project, such as a dam, but are used to help cover international-payments deficits in return for domestic economic reforms in the debtor countries.
However, Conable warns that any such measures must not bankrupt either the commercial banks or the multilateral institutions, ``or dissipate unnecessarily capital they need for their other responsibilities.''
The former US congressman undoubtedly had in mind the safety of the bank's capital, which a needed majority of the bank's 151 member nations agreed to nearly double last year.
Some commercial bankers have hoped that with the capital increase the World Bank could rapidly increase its lending. This would help the debtor nations grow faster and ease their debt-servicing burden.
However, Conable questioned whether the bank itself (minus such affiliates as the International Development Association, which makes easy-term loans to the poorest countries, and the International Finance Corporation, which makes equity investments in private companies in developing countries) could grow 10 percent a year as originally thought. That growth rate would increase its annual loan commitments from $15 billion now to $20 billion in the early 1990s.
Conable's caution stems from the bank's greater emphasis on protecting the environment, helping women progress, and stimulating the private sector in making new development loans.
Protecting the environment is necessary to sustain the resource base and development, he says. Nor can development proceed properly by ignoring women, half the human race.
These greater emphases require more work on the part of the staff of the World Bank, as well as more coordination with the developing countries, the bank president notes.
He also says the bank's ``member countries,'' presumably in this case some industrial nations, do not want the development institution ``to go all out and grow the way we used to.''
Morgan Guaranty Trust Co. charges the bank with a ``timid approach'' to its nonproject-related lending, that it does not provide adequate support to developing countries undertaking economic reforms. It points out that these countries are making more interest and capital payments to the World Bank than they are receiving from the bank. Thus in the first nine months of 1988 there was a net inflow to the bank of $1.63 billion.
This, explains Conable, is partly because nations that have progressed enough in economic terms to ``graduate'' from receiving bank loans are still making repayments on old loans. South Korea (though not graduated) is using it huge international payments surplus to repay old loans.
Further, a country like India with a ``big bureaucracy'' is slow in actually disbursing the loan money that has been approved by the bank for various projects. India has committed but undisbursed bank loans exceeding $10 billion, he says.
Another factor in slow disbursement has been the failure of some key debtor nations to live up to their promises of economic reforms.
Conable noted that Brazil has not met its ``conditionality requirements,'' and thus the bank has held back some loan funds.
The same is true of Argentina. The World Bank agreed last October to make loans of $1.25 billion to Argentina. It was controversial because, with the approval of the United States and some other industrial countries, the bank sidestepped the IMF, which normally takes the lead in providing major loans of this type.
Early this month the bank suspended further loan disbursements when Argentina failed to meet specific loan conditions for economic policy reforms. Because of a forthcoming election, Conable has doubts that Argentina will make the necessary reforms soon.
Such required reforms, he emphasizes, are intended to bring about conditions for economic growth, not to cause shrinkage.
The Argentine loan was one sign of a certain rivalry between the bank and the IMF. ``There are various stresses and strains between the two agencies,'' admits Conable. ``But I wouldn't overstate it.''
This stems from some overlap in their jurisdiction, he explains. The IMF provides short-term stabilization loans to countries with balance of payments problems. The bank makes longer-term development loans. However, both institutions have moved into the area of medium-term loans to developing countries.
``We can manage the overlap by major consultation, cooperation, and coordination of our activities,'' he says.