Indonesia signs IMF deal

By staff and wire reports

JAKARTA, Indonesia -- Indonesia and the International Monetary Fund have ended an eight-month impasse, signing a fresh agreement on economic reform.

The letter of intent signed by Indonesia clears the way for the IMF to resume its $5 billion lending program to the economically embattled Southeast Asian nation.

It also keeps a major debt rescheduling deal on track.

The letter was signed by chief economics minister Dorodjatun Kuntjoro-Jakti and the IMF's Asia Pacific deputy director, Anoop Singh.

Indonesia's relationship with the IMF soured under the previous administration of Abdurrahman Wahid, to the point where a $400 million loan was put on hold.

But Monday's breakthrough signals that new President Megawati Sukarnoputri is keen to have IMF support in the massive task of restoring Indonesia's economy.

The agreement still needs to be approved by the IMF's Washington-based executive board. That process will likely take two weeks.

After that, the long-delayed $400 million loan under the $5 billion program will be released. IFR Asia Pacific chief economist George Worthington said agreement with the IMF would be a big breakthrough for Megawati's new government and should help improve investor confidence.

Reuters contributed to this report.