Bush proposes Baker debt-plan review

President-elect George Bush said yesterday he will undertake a major review of the existing United States strategy for tackling the third world's $1.3 trillion foreign debt burden, but he ruled out forgiving the debt. The present US debt strategy, named after former Treasury Secretary James Baker, called for massive new bank lending to 17 heavily indebted countries if they agreed to implement market-oriented economic reforms.

Mr. Bush told a news conference that parts of the Baker plan had worked, noting that the private sector had been rejuvenated in many countries. He acknowledged that commercial banks had been slow to make new loans, however.

Bush said the review of the debt strategy would involve not only the Treasury Department but also national security officials, ``because we have got enormous problems in our own hemisphere on third-world debt.''

The third world's three biggest debtors are Brazil, Mexico, and Argentina. Together they owe about $290 billion.

Mr. Baker will presumably be closely involved in the review as secretary of state in the Bush administration. The new administration is obliged to submit a report on third-world debt to Congress by February.

Asked whether debt forgiveness would be an option under a revised Baker Plan, Bush said, ``I think you have to be very careful of forgiveness of debt if you want future loans, so I think we've got to find a more versatile answer than simply compelling private institutions to write off the debt.''

Bush's comments marked the clearest admission to date by the Reagan administration that the three-year-old Baker Plan had been overtaken by events and that a new phase in the debt strategy was called for, analysts said.