Robert Go, Jakarta – The latest review team of the International Monetary Fund (IMF) left Jakarta on Sunday with some praises for Indonesia's economic reform progress.

But it warned that investor confidence remained fragile and the recovery process could be derailed by future government mistakes.

The visit, led by IMF Asia-Pacific deputy director Daniel Citrin, is a stepping stone towards a seventh promissory letter by the Jakarta government and the release of yet another US$360 million loan instalment by the Washington-based lender next month.

The IMF said in a statement: "The government has made further progress in implementing its reform programme. It will be important now to renew efforts to build on macroeconomic stability and transform these gains into stronger growth and employment prospects."

It cited a stable rupiah, lower inflation and interest rates, and the government's ability to stick to this year's 2.5 per cent Budget deficit as achievements of President Megawati Sukarnoputri's economic management team.

But it urged Jakarta to follow through on a number of previously pledged reforms, such as the merger of a number of small government-controlled banks and the sale of more assets including nationalised banks that used to belong to some of the country's biggest conglomerates.

The IMF also stressed the importance of cleaning up its tax and Customs bureaucracies, and of lowering trade barriers as a means of establishing "an environment attractive for investment".

Despite the careful warnings, however, Mr Mahendra Siregar, a top aide to Coordinating Economics Minister Dorodjatun Kuntjoro-Jakti, described this latest quarterly review by the IMF as an "encouraging" development and a recognition of Indonesia's stabilising economy.

Although the review took place without an apparent hitch, it also occurred at a time of mounting pressure on the government to cut its ties with the IMF by December, when the current US$5-billion loan programme ends.

Last week, Indonesia's top legislative body, the People's Consultative Assembly (MPR), recommended that Jakarta finalise its arrangement with the IMF and "prepare a thorough exit plan so that it will not lead to monetary instability".

Although Ms Megawati's team is not obliged to follow the MPR suggestion, it is nevertheless a clear signal that a significant number of Indonesia's politicians, including MPR Speaker Amien Rais, think Indonesia could do better without IMF involvement.

Mr Kwik Kian Gie, Minister for Economic-Development Planning and one of Ms Megawati's trusted aides, has also been critical of the IMF's role in Indonesia and has even called for a class-action suit to be filed against it.

But cutting ties with the IMF, analysts warned, is a process that has to be done carefully, as other foreign lenders and donors use the IMF's approval of reforms as a green light for their own programmes with Indonesia.