By David E. Sanger and Nicholas D. Kristof

Washington – The United States is preparing to back a $1 billion payment in international emergency aid to Indonesia on Monday, despite evidence that President Suharto's family and friends are continuing to undermine efforts to break up the multi-billion dollar monopolies they control.

On Thursday, Treasury officials acknowledged that Indonesia has failed to meet some of the most important conditions that were imposed by the International Monetary Fund in return for a $40 billion bailout package. Nonetheless, they said, the United States expects to vote in favor of a gradual resumption of aid when the monetary fund's board meets next week.

Late last winter, after delivering $3 billion to Indonesia, the fund stopped all further payments until the country began to meet the stringent bailout requirements. On Thursday, officials said that they wanted to encourage Indonesia for making a number of painful changes in the last two weeks, particularly raising interest rates and halting lending by the central bank – changes that the country had resisted adopting. The Clinton administration now says those steps satisfy its previous demands that Indonesia make "adequate progress" toward meeting the IMF conditions.

But for all of the monetary fund's optimistic declarations of progress – some of which are clearly designed to entice investors back to Indonesia – the fund has so far failed to achieve its most difficult goal – to dismantle the most egregious examples of "crony capitalism," and break up the monopolies that have built the multi-billion dollar empire of Suharto.

While Indonesia has agreed to dismantle two enormous monopolies in cloves and palm oil, both Indonesians and foreign executives in Jakarta say that the monopolies now thrive in different forms.

Within the administration and on Capitol Hill, the decision to send more aid to Indonesia is enormously sensitive and politically risky.

The White House has been trying unsuccessfully to persuade Congress to contribute another $18 billion to the IMF – a plea President Clinton repeated Thursday at his news conference – at a time when many lawmakers have complained that the monetary fund's strategies are misguided and that it is propping up a corrupt and repressive regime in Indonesia. Moreover, the fund will resume payments just as human rights abuses in Indonesia are escalating.

So far, the administration has declined to say whether it would link its vote at the IMF to Indonesia's handling of the mounting protests. Testifying before Congress in early March, Treasury Secretary Robert Rubin said "it seems to me that you do have to have compliance" with the monetary fund's stringent conditions, which include the breakup of the monopolies, before Indonesia can begin to draw on a $40 billion bailout package that the United States helped design.

In interviews Thursday, however, administration officials said they were favoring sending Indonesia some of the money to encourage it to accelerate its reforms. The fund has agreed to dole the money out in billion-dollar installments, keeping month-to-month pressure on Suharto. A similar strategy was used last year, with mixed results, to force economic changes in Russia.

On Thursday both American and monetary fund officials argued that Suharto's government has, for the first time, fulfilled several of the most easily measurable pledges, including restoring discipline to the nation's central bank. The bank's wild lending spree earlier this year – a desperate effort to keep Indonesia's financial institutions and major businesses from collapse – fueled runaway inflation and sent international investors fleeing.

Since signing the third agreement with the fund two weeks ago, Indonesian officials have also begun to negotiate with international creditors who lent $70 billion to Indonesian businesses, almost all of which have stopped paying their bills. Slowly, Suharto's government has begun restructuring a collapsed banking system, though it has yet to close many banks linked to the Suharto family and its circle of powerful friends.

The fund's top official in Indonesia, Prabhakar Narvekar, said earlier this week in Jakarta that the country's compliance with the agreement has been "good enough." Thursday, speaking in Washington, the fund's No. 2 official, Stanley Fischer, said Thursday that the fund planned to give money only after making "monthy checkups on the execution of the program."

"We have new monitoring and enforcement measures in place," he said, adding that while "there have been difficulties, we believe the problems will be taken care of."

Still, David Lipton, undersecretary of the Treasury for international affairs, said Thursday that "we are concerned about the Indonesians' capacity and determination to follow through on their agreements. That is why the IMF is dispersing $1 billion at a time." He said the United States would not make a final decision to favor the resumption of aid until Indonesia and the fund resolve some outstanding differences over the weekend.

While the United States commands enormous influence over the fund, its 18 percent share of voting power on the board is not sufficient to veto the IMF's decisions about turning aid on and off.

In Jakarta this week, Indonesian and foreign business executives said that Indonesia has backtracked on promises to break up two key monopolies that have enormous impact in the economic life of the world's fourth-most-populous nation.

The monopoly in cloves was controlled by Suharto's youngest son, Hutomo Mandala Putra. The industry employs 2 million Indonesians, but the monopoly was widely regarded as a disaster, lowering prices for producers while charging above-market rates to the buyers – and somehow losing money in the process. It received more than $300 million in loans from state-controlled banks.

Since Feb. 1, at the fund's insistence, farmers were supposed to be free to sell cloves to anyone they wanted. In practice, however, the government appears to be forcing the large cigarette companies to continue buying from the old clove monopolists. A mid-level worker at a large cigarette company said that unless they purchase cloves from the monopoly, they cannot receive the special stickers needed to sell their cigarettes. The IMF also insisted that Indonesia end a ban on exports of palm oil, widely used for cooking. The ban was used by the government to keep prices low in hopes of forestalling further food riots. But the export ban also aids one of Suharto's closest associates, Liem Sioe Liong, who has huge interests in food processing that requires vast quantities of the now inexpensive palm oil.

Business analysts in Indonesia say that companies have been privately warned against exporting palm oil. In a country like Indonesia, officials control so many levers of power that it would be easy for them to punish or even ruin a disobedient business.

The government is denying that there is any unofficial ban on palm oil exports or on free trade in cloves. Trade and Industry Minister Mohamad Hasan, who is nicknamed the "plywood king" for his control over an informal nationwide plywood monopoly, said his ministry is "committed" to the IMF accord.

The government's finance minister, Ginandjar Kartasasmita, told journalists in Jakarta Thursday that "there is no longer a member of the family that is running a monopoly." "Put it on the record," he said. "Watch us."