Louise Williams, Jakarta – Rising prices, cutbacks in health services and lay-offs resulting from economic reforms to be pushed by the International Monetary Fund (IMF) will hit Indonesia's poor and could fuel social unrest, a group of non-government organisations said yesterday. The WAHLI coalition of environmental and grassroots organisations said measures sought by the IMF in exchange for a program to rescue Indonesia's corporate sector from the currency crisis were expected to be severe. "Fuel subsidies will be stopped, government expenditure reduced - we are afraid the spending on hospitals, local clinics and schools will be cut back," WAHLI's executive director, Ms Emmy Hafild, said.

The expected increase in fuel prices would affect transport costs and push up the price of all basic commodities, she said. The downturn in the labour-intensive construction industry would force lay-offs and further labour unrest should be expected. "Those who will sacrifice the most will be the poorest. But the business groups with vested interests will continue to receive special rights to exploit the nation's national resources," Ms Hafild said of Indonesia's dominant corporate sector, with its powerful political connections.

WAHLI said it feared increasing violence in Indonesian society as the stresses of vast forest fires and the severe drought, combined with spending cutbacks, began to affect ordinary people, already suffering under unemployment rates of 38 per cent. "What we are worried about is that the usual climax of fires and long periods of drought is famine and crop failures. There could be a long period of unrest."

The IMF, the World Bank and officials of the Soeharto Government continued closed-door meetings in Jakarta yesterday. The rupiah, pushed to an all-time low last week ahead of the call for IMF assistance, held on to modest gains, but remained well below its previous value.

WAHLI said its own investigation into the forest fires which continue to burn across parts of Indonesia showed that more than 1.1 million hectares of forest have been lost, compared with the 400,000 hectares conceded by the Government.

Environment Ministry officials warned on Monday that the haze and fire problem was not over, after the number of fires sharply increased as a very hot, dry and windy weather pattern settled across Indonesia.

WAHLI said the Government had instructed local newspaper editors to stop blaming big timber and plantation companies and to instead blame the El Nino pattern.

Ms Hafild said the group was not confident that threats against big companies which started the fires as a means of cheap and quick land clearing would be prosecuted, nor that any fundamental changes would be made to prevent a repeat of this year's environmental disaster.

She said about 97 per cent of Indonesia's wood product exports were produced using virgin rainforest and that renewable timber plantations had not yet matured.

"The haze and forest fire problem runs parallel to the financial crisis. The fundamentals of both are the distortion of the economy, monopolies and vested interests in the economy which have not been addressed."