Joanne Collins, Jakarta – The IMF said on Wednesday it was optimistic Indonesia's willingness to revise controversial central bank law amendments would end a six-month deadlock on a vital $5 billion loan programme.

Resumption of International Monetary Fund loans would give President Abdurrahman Wahid a shot in the arm as he teeters toward impeachment over his erratic rule, and signal to donors and investors Indonesia's economic reforms were back on track.

"This is a positive development and I'm much more hopeful now we can reach some kind of agreement on this and get the mission to come to discuss [the programme]," John Dodsworth, the IMF's senior representative to Jakarta, told Reuters.

"We're very hopeful this is going to work," he added, without giving details on when an IMF mission, needed to clear the way for resuming the loan programme, would visit Jakarta.

Indonesia on Tuesday bowed to pressure over the proposed central bank amendments when new chief economics minister Burhanuddin Abdullah said the government was willing to revise the proposed changes.

The Fund froze its aid programme to Indonesia in December over a raft of missed economic targets and foot dragging on reforms that has held up a $400 million loan.

But the law changes have since become the biggest barrier, particularly Article 75 which stipulates the whole bank board resign once the new laws take effect. The Fund fears that would erode the bank's hard won independence. An independent report recently said the clause was a "serious mistake".

Dodsworth said it was now up to parliament and the government to strike an agreement on the amendments. "We favour coming to a compromise on this and the minister [Abdullah] at the moment is trying to get a consensus with the government and the parliament on the best way forward," he said.

In another positive sign for Indonesia's economy, the World Bank – which slashed its aid programme earlier this year, citing concerns over regional autonomy laws and sluggish economic reforms – said at the weekend its board was set to approve a $320 million loan next week.

But Indonesia is still battling numerous economic woes as it attempts to escape from more than three years of crisis. Economic growth is only modest, a crushing debt burden hangs over the country, foreign investors are still wary of the political instability surrounding Wahid's waning fortunes and inflation has moved back into double digits.

The statistics bureau said on Wednesday it expected inflation in June to be 1-1.5 percentage points above the May figure of 1.13 percent because of price rises in key sectors. It also said year-on-year inflation was expected to be higher in June. Indonesia's year-on year inflation was 10.82 percent in May, from 10.51 percent a month earlier. The government recently raised fuel prices by 30 percent and plans to soon hike electricity tariffs.

[On June 23 the Jakarta Post reported that industrialized nations added Indonesia to a money laundering blacklist thereby putting international financial transactions with that country under a tougher scrutiny. The blacklist, issued by the Financial Action Task Force on money laundering, includes governments that don't cooperate with international money-laundering efforts. The Indonesian government recently proposed money-laundering legislation to the House of Representatives in Jakarta - James Balowski.]