The International Monetary Fund needs to increase its resources to fully participate in the Third World debt reduction plan proposed by Treasury Secretary Nicholas Brady, an IMF official said.

The IMF needs to both double its capital and issue new SDRs, Special Drawing Rights, that serves as the IMF's accounting and reserve unit, to keep up with the Brady plan, the official, who asked not to be identified, said Friday."Taking into account the changes in the international economy over the past five years, the IMF needs a 50 percent increase in quotas," he said.

Last week, Brady advanced ideas for Third World private bank debt reduction using IMF and World Bank loans and guarantees. Yet, the Treasury opposes an increase in IMF quotas, its capital, or a new issue of SDRs.

"I would be surprised if I was pushed to overspend" to help Mexico reduce its foreign debt of more than $100 billion at this moment, the official said. "What would happen if we used up our resources to help Mexico, and were left without any money for Sierra Leone?"

Socialist countries need support by institutions such as the IMF to help them "free prices without suffering from inflation," since they lack the checks and balances to regulate their economies while trying to introduce market mechanisms in them, he said.

"An interruption, or reversal, of these historic changes would be a catastrophe," the official said, warning that some socialist countries are expressing interest in joining the IMF.

The official defended Brady's initiatives saying the debt makes it impossible for heavily indebted countries to take the very measures that would alleviate debt.

Since new money is not available, the sensible solution is to reduce debt to allow countries to grow out of their problems in about three to four years, until they can again become attractive to flight capital, investments and new money, the official said.