By Robyn Dixon in Melbourne and Jennifer Hewett in Washington

The IMF's managing director, Mr Michel Camdessus, has expressed "deep concern" over the rioting in Indonesia, but said the real cause of unrest was not price rises, but the deeper economic management problems which had led to the crisis in the first place.

Mr Camdessus said in Melbourne yesterday that the 71 per cent petrol price rise which led to riots in the city of Medan was indispensable to the country's economic future, and he urged Jakarta to push ahead with the tough economic program backed by the IMF.

He said the petrol price rise was part of the IMF's agreement with Indonesia, and described IMF policies as medicine which created more pain at first, but which would lead to a more balanced economy.

"Deplorable as these [riots] ... can be we should always remember that our programs are not the deep origin of these problems," Mr Camdessus said.

He was also "extremely concerned" about the cases of missing activists in Indonesia.

"I believe that human rights violations can never be accepted and are never a good thing for economic progress," he said.

While Korea and Thailand had shown their commitment to tough monetary policy, Indonesia had not yet proved it was capable of sticking to the IMF program, Mr Camdessus said. He warned there were no instant miracle cures to Asia's crisis.

Australia is set to provide new loans to Indonesia following the decision by the IMF to release $US1 billion ($1.56 billion) to the Soeharto Government but most other countries - including the United States and Europe - are still delaying paying out.

Australia will lend $US300 million as part of its contribution to the IMF rescue package for Indonesia; Japan will provide $US1 billion and Malaysia will make some funds available.

But the US, hobbled by a hostile Congress and doubts about Indonesia's sustained commitment to reform, prefers to wait longer before the Administration hands over any money. As part of the massive $US43 billion rescue package organised by the IMF last year, a range of countries agreed to provide $US17 billion worth of second-tier financing.

The collapse of the first two agreements between the IMF and the Soeharto Government meant there was no question of this money being called on, with the IMF itself suspending a $US3 billion payment in March.

But following a new deal between the IMF and Indonesia - and its gradual implementation - the funds board agreed this week to hand over $US1 billion as a first step.

The IMF payment means that other institutions such as the World Bank and the Asian Development Bank will also be able to start releasing funds.

The scepticism about Indonesia is still evident, however, with the IMF doling out the money in one-month instalments and subject to constant review.

After the IMF released its delayed loan to Indonesia yesterday, Mr Camdessus said he believed Indonesian authorities had belatedly realised the damage that their delays to structural economic changes had caused to the country's international economic credibility.

"Now they know that, they know the only effective way to rebuild their credibility is to stick to the program they have agreed with us," he said.

In Washington, the IMF's first deputy managing director, Mr Stanley Fisher, made it clear that the situation in Indonesia would have to be monitored very closely.

"We are under no illusions that everything will be smooth sailing from now on out," he said. "There really is not much room for slippage."