Indonesia expects IMF deal within days

IMF officials began talks on 20 August, and Indonesian state enterprises minister Laksamana Sukardi said a preliminary agreement was within reach.

"They [the IMF] are very optimistic and hopes are high," he said. "It is expected that the new letter of intent will be completed on Thursday and that the LoI will be sent straight to Washington [for approval]."

IMF officials were keen to play down the suggestion of a conclusion by 23 August.

"Clearly optimistic"

But they remained positive, indicating that the new government of President Megawati Sukarnoputri has yet to put a foot wrong.

"We have been told of the new government, the economic team's clear commitment to accelerate economic reforms to intensify the implementation of the programme," said Anoop Singh, the IMF's Asia deputy director.

Mr Singh said he was "clearly optimistic" about the talks, which are expected to last for about a week.

The most recent instalment of the loan programme, worth $400m (£277m), was frozen under the previous administration, led by President Abdurrahman Wahid.

The IMF believed it was dragging its feet over economic reforms agreed as part of the conditions attached to the lending.

Debt help

In all, the programme is worth $5bn (£3.5bn), while a hike in World Bank aid could also be on the cards if the IMF talks are successful.

The letter of intent itself - negotiated under the previous administration - is unlikely to undergo more than minor alterations, which should speed approval by the IMF's executive board in Washington, DC.

Among IMF demands is an increase in the transparency of the dealings of the Indonesian Bank Restructuring Agency (IBRA), which took over huge quantities of formerly bank-held assets during the massive bailout following the Asian currency crisis of 1997.

But news reports in the Far Eastern Economic Review suggest that the LoI will concentrate on broad principles rather than specific targets, in line with a shift in IMF and World Bank thinking away from over-use of prescriptive numerical yardsticks.

Paris Club meeting

The talks are vital to Indonesia because the rescheduling of its $5.8bn of international debts to the so-called Paris Club of lending nations are up for discussion next month.

Agreement with the IMF will create a much more positive environment for the discussions.

"We have to have an agreement before the Paris Club [meeting]," Mr Sukardi said.

Indonesia's total external debt is about $132bn, of which $72bn is in foreign loans and $60bn is domestic.