For more than a decade, the International Bank for Reconstruction and Development (often called the World Bank) has been instrumental in financing projects designed to raise the standard of living of the underdeveloped nations of Asia and Africa.

The Bank lends money to various countries at rates of four to six per cent, repayable in twenty years. The agency investigates each loan carefully, and requires that the loan be "bankable"; that is, that the borrower be able to repay fully in "hard currency." "Hard currencies" are those of high standing in the international market--chiefly U.S. and Canadian dollars, the pound sterling, Swiss francs and West German marks.

This requirement of "hard currency" repayment has proven a stumbling block to many nations seeking loans; the rule means, in effect, that only the richer of the underdeveloped countries--those having large dollar reserves--have been able to borrow freely. Unilateral loans, granted by the United States, are of course repayable in dollars.

In order to do something about those loans which the existing system cannot handle, Senator A.S. (Mike) Monroney of Oklahoma has proposed the establishment of what he calls the "international piggy bank," an International Development Association to be affiliated with the IBRD and to take only those loans that the IBRD cannot accept.

The I.D.A. would be capitalized at $1 billion, with the United States contributing $300 million of this total. The original investment would be used by the sixty nations that now comprise the IBRD to purchase voting stock in the new agency. Later, countries might buy non-voting stock with "soft currency." This practice, Monroney says, will enable the United States to dispose of some of the foreign currencies that will accrue to it from the sale of farm surpluses.

I.D.A. loans would be made in various local currencies. For example, should India wish to borrow $100 million for an irrigation project, the I.D.A. could lend pesetas to buy Spanish concrete, guilders to pay a Dutch engineering firm, and rupees to pay the local labor. The loan would be repaid (at two per cent over forty years) in Indian rupees; an additional virtue of this system is that the Indian currency with which India repays the loan will later be used to purchase Indian products.

Monroney's plan has many virtues; it should make it easier for poorer countries to borrow, and, through the use of local currencies provide a double stimulus to the borrower's economy. As a device for the complete internationalization of foreign aid, however, its effectiveness is doubtful. Russia is not a member of the World Bank, and therefore the transfer of United States aid effort to the IBRD and the I.D.A. would simply mean that aid competition would now pit the Western alliance (instead of the United States alone) against Russia.

Although Eugene Black, president of the World Bank, has expressed interest in Monroney's proposal, little has been done about the plan since it was introduced two months ago. The "international piggy bank" could be an extremely useful device for making the present international (Western) loan program more effective and more generous. The direction of American foreign aid funds to an international agency such as the I.D.A. would be a sign of good faith and of "no strings attached" aid that the Soviets might feel constrained to match. Monroney's proposal, though not a panacea, is probably a good idea; it deserves more consideration than it has been given to date.