Indonesia sees IMF deal within week

By staff and wire reports

JAKARTA, Indonesia -- The Indonesian government believes it can work out a deal with the International Monetary Fund within a week.

The breakthrough would get a $5 billion loan program back on track. It has been stalled for more than six months.

A team of IMF officials began meetings with Indonesian officials in Jakarta on Thursday. The talks will continue for about 10 days.

Dipo Alam, a senior economics ministry official, said Friday that he is "confident and optimistic" a new deal can be reached in a week.

Breakfast with Wahid

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The IMF mission, lead by Asia-Pacific deputy director Anoop Singh, on Friday had breakfast with President Abdurrahman Wahid. But the parties declined to say what they discussed.

An IMF spokesman told CNN that the mission aims to lead to both sides signing a letter of intent. The IMF wants Indonesia to commit to continuing reforms.

That would free up a $400 million loan that the IMF froze in December. It would also give Wahid's administration a much-needed shot in the arm.

But the spokesman said it was too early to discuss how the talks were progressing. The IMF wants to wait until talks conclude before discussing results.

Mission left empty handed in April

The IMF has been dissatisfied with the pace of reforms in Indonesia. A previous mission left Jakarta in April without any progress.

It voiced concern about the viability of Indonesia's budget, given its decaying currency, the rupiah.

Since then, though, the Indonesian parliament approved a revised budget, and a new fiscal package is awaiting approval.

The government also appears willing to revise controversial changes to the laws governing its central bank.

John Dodsworth, the IMF's senior Jakarta-based representative, has said it could take several months to reach an agreement on those changes.

But he said the IMF would work with parliament over the next six months to come up with a compromise.

Central bank independence in spotlight

The IMF fears the changes could undermine the central bank's hard-won independence. The most problematic is an article stipulating that the central bank board resign once the amended law comes into effect.

The IMF has also voiced concern over Indonesia's political instability.

That has lead some observers to suggest the IMF may wait until the Indonesian parliament begins impeachment hearings against Wahid on August 1.

Analysts give Wahid little chance of surviving the hearing, meaning Vice President Megawati Sukarnoputri will likely take over the administration.

Reuters contributed to this report.