Talks resume on IMF's $43bn rescue package to Indonesia

TALKS on the resumption of International Monetary Fund (IMF) aid to Indonesia began again yesterday forcing the new government and its international creditors to find a way of meeting the IMF's demands without sparking off more rioting.

The cost of recent events has yet to be calculated, but Nomura Securities Singapore forecasts a 10 per cent economic decline, largely based on the attacks on the ethnic Chinese business community.

Leading the IMF team is Hubert Neiss, the fund's Asia-Pacific director. He said, "Political stability is extremely important for economic progress".

B.J. Habibie, the new president, has pledged to honour the tough terms of the IMF's $43bn rescue package, but has not indicated how.

Moreover, targets agreed with the IMF in April are looking increasingly academic. Inflation is running at 50 per cent, trading on the stock exchange has ground to a halt, aside from a rush out of shares associated with Suharto family interests, and independent estimates put private sector debt at $80bn.

British lenders, primarily HSBC Holdings, have some $4.3bn at risk.

Because it is unclear how long President Habibie will be able to cling to power, the IMF is breaking its practice of shunning talks with opposition leaders. Mr Neiss will meet Amien Rais and Megawati Sukarnoputri, the two most prominent, as well as the trade union leader Muchtar Pakpahan, who has just been released from jail and is a prominent opponent of the IMF rescue package.