Washington – The International Monetary Fund (IMF) threw Indonesia a new financial lifeline on Friday, approving a new three-year loan worth $5 billion to help seal a tentative economic recovery.

An IMF statement said Indonesia, the second of Asia's one-time tiger economies to turn to the fund for help, would receive $ 349 million immediately. Further payments will depend on Indonesia meeting economic targets agreed with the IMF.

"The Indonesian authorities are embarking on a bold and comprehensive programme aimed at restoring growth, entrenching low inflation, reducing the public debt, phasing out the dependence on exceptional financing and normalising relations with private capital markets," said IMF First Deputy Managing Director Stanley Fischer.

"As confidence improves and risk premia fall, there is room for further declines in interest rates, which remain high in real terms." The IMF funding follows hard on the heels of an international agreement to offer Indonesia some $4.7 billion in bilateral and multilateral loans and grants from other sources, including the World Bank and the Asian Development Bank.

The new loan replaces a previous IMF credit and makes additional cash available. In return Indonesia is promising further efforts to ensure the problems which brought the economy tumbling down in 1997 do not occur again.

A document outlining policies underpinning the new loan says that Indonesia expects economic growth of 1-2 percent in the current financial year, rising to 3-4 percent in 2000-01 and 5-6 percent in the slightly longer term. Inflation will stay at "low single digits" and reserves will rise.

At the same time the government promised to revive efforts to restructure banks and firms and do more to improve governance, the code word the IMF uses when it talks about top-level corruption.