Robert Go, Jakarta – In a development that might send Indonesia's economy into yet another tailspin, International Monetary Fund (IMF) officials warned yesterday of possible delays to the agency's next US$400 million instalment to Jakarta due to serious questions over the government's reform progress and policies.

The IMF was expected to release the money, which is part of a US$5 billion loan programme it struck with Indonesia earlier in January, before its board of directors go into recess at the end of December.

Agency sources in Jakarta and Washington, however, told The Straits Times that Indonesia's economic team would first need to clarify a number of policy decisions it has made during the last few months before the next disbursement.

Key issues, according to an insider involved in talks with Chief Economics Minister Dr Rizal Ramli's team, include the country's decentralisation plans, corporate restructuring guidelines, asset disposal procedures and the current turmoil at the Central Bank, where the government is charged with trying to undermine Bank Indonesia's independence.

IMF officials said that the agency, which in the past has been accused of exhibiting overbearing attitudes towards Jakarta, now steers clear of micromanagement issues when it comes to dealing with Indonesia and the other countries it has assisted.

But they also indicated that Dr Rizal's team has made slow progress in addressing worries – previously expressed by the IMF through an October letter to the government – over implementation of certain key reforms to which Indonesia has committed.

"Our position on the need for greater transparency in corporate restructuring is well known – decentralisation should be managed carefully – and we are keeping close tabs on the process of appointing a new management team to Bank Indonesia," said an IMF official in Washington.

Indonesia promised to divest the government's stakes in two major banks, but backed off from selling them in October. And critics have characterised regulations on decentralisation, which kicks in next January, as confusing and contradictory when it comes to questions over how much real fiscal and governing power local administrations would receive from Jakarta.

The IMF and a few leading Indonesian economists have also criticised recent debt-restructuring deals for Texmaco and Chandra Asri, two heavily-indebted companies whose owners are reported to have strong connections to the government.

Perhaps in an acknowledgement that not all is well with the IMF team that arrived on the ground to discuss the next instalment, Dr Rizal told Reuters yesterday that although progress is being made, there is no guarantee that the loan will come through before the end of the year.

University of Indonesia economist and former presidential adviser Sri Mulyani, however, said that the IMF's beef is with the current economic team's apparent lack of focus and leadership.

"The list of things that are making the IMF nervous keeps on growing. And Dr Rizal and his team have not focused on their pledged reforms. There has been no continuation of policies, no consistency, from the technical point of view," she said.

The last time the IMF chose to withhold its cash injection to Indonesia in April, the rupiah and other key financial indicators for Indonesia plunged.