The International Monetary Fund was fiercely criticised for its failure to salvage the Indonesian economy in 1997-98. Much of the criticism was justified. With financial markets crashing around it, the IMF's mission should have been to restore investor confidence and macro-economic stability.

Instead, it insisted on the implementation of a long laundry list of painful microeconomic changes that further strained financial tensions and shattered public confidence. The policy appeared to be driven by Washington's antagonism towards President Suharto and his cronies as much as by a determined attempt to stop the rupiah from plummeting.

But the fund's previous mistakes were about priorities and timing rather than principle. There is no doubt that Indonesia needs to untangle business from politics if the world's fourth most populous country is ever to maximise its economic potential and regain investors' trust. Now is the time to push hard for such structural changes, as an IMF mission has arrived in Jakarta this week to consider whether to resume its $4.8 billion loan programme. It must be doubted whether any such radical restructuring programme can ever be successfully imposed from the outside.

The appointment of Megawati Sukarnoputri as president has raised hopes that change may now come from within Indonesia. Her election last month has been well received by the people. She has appointed a strong cabinet of market-savvy technocrats who have impressed investors. Since she came to power, the rupiah has climbed 30 per cent against the US dollar – although this reflects how far the currency had previously fallen as much as expectations of rapid change.

But a similar euphoria greeted the election of Abdurrahman Wahid as president two years ago. The opportunity was squandered not only because of Mr Wahid's personal idiosyncracies but also because of the power of vested interests and the obduracy of the bureaucracy.

Suharto-era corporate bosses are still capable of neutering economic proposals that cut across their own interests. Most notably, they appear to have succeeded in de-fanging the Indonesian Bank Restructuring Agency, which was supposed to repackage and sell on distressed assets.

The IMF should calibrate its financial support according to how far Mrs Megawati pushes ahead with structural reform. But it would be counter-productive to force change on Indonesia once again from outside. The IMF can put extra fuel in the tank if the car is heading in the right direction but it should not try to seize the wheel.