By Gwen Robinson in Jakarta and John Authers in New York

Negotiations on resolving Indonesia's massive private foreign debt overhang began yesterday in New York against a backdrop of confusion in Jakarta and growing division in the camps of both international lenders and their Indonesian debtors.

Bankers close to the negotiations, which are being held at the headquarters of Chase Manhattan in New York, said the talks were likely to last longer than the meetings over Korean debt earlier this year and will probably continue for another two days. Indonesia's private foreign debt is put at more than $74bn.

A series of contradictory signals from the Indonesian government on economic reforms has fuelled fears that the country could once again backslide on pledged reforms.

A 117-point reform package was agreed last week with the International Monetary Fund and Indonesian President Suharto this week reaffirmed his intention to carry out the programme. But recent developments have already begun to erode international confidence in Indonesia's commitment to reform.

"The story is not about the pledges made, it's about prospects for their implementation – it's about the utter lack of co-ordination and the creeping feeling that one arm doesn't know what the other's doing," said a western diplomat in Jakarta.

The latest confusion was triggered by a conflict between cabinet ministers over palm oil exports, which were banned in January in an attempt to stabilise domestic prices. Prices for palm oil and by-products – staple items on the domestic market – soared as the rupiah plunged in January to a low point of 17,000 against the dollar.

Under its latest agreement with the IMF, the government said it would lift the ban by April 22 and replace it initially with an export tax of up to 40 per cent, to be reduced after prices stabilised.

But Mohamad "Bob" Hasan, trade minister and a close friend of Mr Suharto, cast doubts on the plan this week when he said the ban would be maintained indefinitely, despite the IMF agreement. "This is the Republic of Indonesia, not the IMF republic," Mr Hasan told an Indonesian newspaper.

Other senior officials rushed to deny Mr Hasan's assertion. But analysts said the confusion had "already done the damage". The Indonesian rupiah and the Jakarta stock market fell for the third consecutive day after an initial boost in the wake of the IMF agreement.

There are also new concerns about reform plans in other areas, including the government's promise to dismantle monopolies – many controlled by Mr Suharto's family and associates. Last week a cabinet minister said that Goro, a company owned mainly by Mr Suharto's youngest son, Hutomo "Tommy" Mandala Putra, would be given an exclusive contract to distribute non-essential food items. The claim was hastily denied. The most disturbing aspect of the latest confusion is the timing. The IMF's executive board is still to approve the Indonesian agreement and release the second $3bn tranche of the IMF-sponsored $43bn rescue package.