Finance ministers from the Group of Seven economic powers are likely to agree on a set of reforms to International Monetary Fund lending mechanisms at their talks in Japan in July, a source in international finance said Monday.

The envisaged reforms include strengthening the Washington-based international lender’s crisis-prevention functions and discouraging long-term and repeat borrowing, the source said.

The G7 ministers, who will gather in Fukuoka on July 8, will forward the proposals in a report to their leaders, the source said.

The G7 groups Britain, Canada, France, Germany, Italy, Japan and the United States.

The finance ministers’ talks will be followed by a meeting of foreign ministers from the Group of Eight nations in Miyazaki on July 12-13 and a summit of G8 leaders in Okinawa on July 21-23. The G8 comprises the G7 plus Russia.

The source said one of the proposals is to make the IMF’s Contingent Credit Lines, a precautionary short-term lending mechanism, easier to use by lowering the cost of borrowing and eliminating the commitment fee.

The CCL, set up in April 1999, aims to give well-run countries immediate access to IMF funding if they become victims of financial market contagion. Despite pressure from the IMF on Brazil and several other countries, no government has yet signed up for the program.

The planned reform is in accordance with Japanese and U.S. recommendations that the lending facility be activated more automatically as it is designed to prevent contagion.

Washington is especially keen to breathe life into the CCL. Treasury Secretary Lawrence Summers has been calling on the IMF to shift toward emergency lending and leave most long-term funding to the World Bank.

The source said Germany is reluctant to make the CCL more usable, and its opposition could be a major stumbling block to a G7 accord on the proposal at the upcoming finance ministers’ talks.

The source said the G7 finance ministers are also likely to agree to raise lending charges on IMF borrowing in line with the length of time it takes countries to repay debts, so as to reduce the number of long-term repeat borrowers.

They will single out for reform the regular Stand-by Arrangements, which aim to help solve short-term balance-of-payments difficulties, and the Extended Fund Facility, which is intended to promote long-term structural reform, the source said.

At present, only the Supplemental Reserve Facility, which was set up in 1997 to cope with sudden disruptions to market confidence, attracts penalty rates related to the length of time that loans are outstanding.

In addition to a report on the international financial system, in which the reforms to the IMF facilities will be included, the G7 finance ministers plan to present three other reports to their leaders.

The additional reports will deal with information technology and its policy implications, possible responses to money-laundering and other financial crimes, and reducing the debt burden on the world’s poorest nations.