Jennifer Hewett, Washington – The International Monetary Fund, responding to criticism of its tough approach to Indonesia, has indicated it is willing to be more flexible in negotiating changes to the country's economic reform program.
The IMF's deputy managing director, Mr Stanley Fischer, said the 182-country organisation was "deeply mindful... of the events taking place in Indonesia", and suggested "there is room for flexibility" in the IMF's demands.
However, Mr Fischer emphasised that the Indonesian Government would first have to move ahead with many of the crucial reforms the fund had demanded.
If Jakarta took steps to meet the preconditions for currency boards - including banking reforms and other measures to restore market confidence - it was possible such an arrangement could be created, he said. Whether it could be created within six months would depend upon how rapidly Indonesia made the necessary economic decisions, he said.
"We haven't changed our view. If the preconditions are met, the currency board could go forward.
"If the decisions [on reform] were made, then you could begin to see the problems being dealt with and the preconditions being met."
Handling the standoff between the IMF and the Soeharto Government is one of the difficult issues facing the fund, which has suspended the next planned instalment of assistance originally due next Sunday.
The fund does not want to undermine its own credibility by allowing the Indonesian Government to bypass its demands.
However, it also wants to ensure that Indonesia does not lapse into financial and social chaos, possibly unravelling rescue packages throughout the region.
The currency board has been a particular sticking point, with the IMF vehemently opposed to its operation in present circumstances and complaining that debate over it has derailed more substantive issues.
While Mr Fischer was conciliatory, he was careful to accompany any promises with the need for the Government to do far more than it has so far.
Signals from Indonesia on the currency board were hard to interpret, he said.
"There are days when it seems to be removed and days when it's not."
The IMF was particularly concerned about humanitarian issues in the country, he said.
Every time the IMF reviewed a country's program, it became in essence a renegotiation anyway and there was scope for compromise.
This suggests that the IMF will be open to bargaining with the new Indonesian Government as long as it sees adequate progress.
The Japanese Government said yesterday that the Prime Minister, Mr Ryutaro Hashimoto, would visit Indonesia on Saturday to discuss the financial crisis with President Soeharto.
Japan would continue to help Indonesia, but only if it abided by the IMF's program, Mr Hashimoto said.
"Japan has vowed to give as much co-operation as possible ungrudgingly to Indonesia within the framework of the IMF."
In Canberra, the Minister for Foreign Affairs, Mr Downer, said Australia had helped convince the IMF to recognise the need for Indonesia to be able to feed its population.
The Prime Minister, Mr Howard, has warned the IMF to be more flexible or risk a repeat of the rioting which rocked the country last month when food prices soared as a result of the massive fall in the value of Indonesia's currency, the rupiah.
Mr Downer said he believed the IMF was now taking heed of these concerns.