Louise Williams, Jakarta – President Soeharto promised a new round of economic reforms during crisis talks with the International Monetary Fund yesterday, in an attempt to turn around Indonesia's ailing economy and hold off a growing challenge to both his leadership and his Government.

Mr Soeharto met the IMF deputy managing director, Mr Stanley Fischer, for more than an hour in negotiations over his Government's implementation of the IMF's $US38 billion ($59.4 billion) rescue package. The meeting preceded the arrival of a team of United States Government officials late last night.

The IMF talks came as Indonesia's leading economist and a former Cabinet member of the Soeharto Government, Professor Sumitro Djojohadikusumo, launched a scathing attack on the political and economic system and called for the immediate replacement of the Soeharto Government.

Professor Sumitro, one of the key architects of Indonesia's economic development and who has close family ties to Mr Soeharto, said Indonesia was not facing a simple economic crisis but a crisis of confidence in the "entire body politic".

"There has long been a gap between macro-economic policies, which are by and large adequate, and micro-economic policies, which are full of distortions and inconsistencies and marred by corruption and excessive protectionism," he told the Jakarta Post. Professor Sumitro, whose son, General Prabowo Subianto, is married to one of Mr Soeharto's daughters, said Indonesia could achieve economic recovery within two to three years, but a failure to implement reforms would plunge the country into a painful and protracted depression. The growing number of senior Indonesian figures prepared to publicly criticise the Government indicates a significant new momentum to oppose a regime which has routinely jailed or silenced its critics.

Professor Sumitro, while saying the Government should be immediately replaced, stopped short of calling for Mr Soeharto to step down.

Indonesia's two most prominent Muslim leaders also publicly criticised the Government and said the declaration by the pro-democracy leader, Ms Megawati Sukarnoputri, that she would challenge Mr Soeharto would have an impact on the political mood.

However, they said that Ms Megawati had little chance of succeeding within the present political system, under which she has been barred from political activity.

The head of the 28 million-strong Muhammadiah organisation, Mr Amien Rais, praised Ms Megawati's daring and joined her call for Mr Soeharto to step down. The head of the 38 million-strong Nahdlatul Ulama, Mr Abdurrahman Wahid, said Parliament should summons the Government and demand an explanation for the economic crisis. Mr Fischer said the IMF talks were "constructive" and he expected Mr Soeharto to announce more reforms over the next few days.

The stockmarket reacted positively to the presence of the IMF crisis team in Jakarta, gaining more than 3 per cent on a day in which there were big losses in Hong Kong and Singapore. But the rupiah, which has suffered a dramatic slide over the past week, failed to rebound and was trading around 8,500 to the US dollar, down from around 5,000 at new year.

Mr Soeharto is due to meet the IMF managing director, Mr Michel Camdessus, on Thursday and to discuss the economic crisis with the US Government delegation.

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