Indonesia has broken down - its cities, political system, and economy rocked by the worst violence since President Suharto took power in 1965 - but the International Monetary Fund (IMF) remains unmoved.

The IMF controls Indonesia's 43-billion-dollar international bail-out, agreed last November after the rupiah dropped 70 percent against the U.S. dollar in a little over four months. Three billion dollars in emergency loans, to help service foreign debts and shore up the country's sagging reserves, were disbursed before the Fund's agreement with the government in Jakarta fell apart over steps to be taken in exchange for the money.

Another one billion dollars was released early this month, after the sides signed their third agreement in six months. In exchange for the loan, Jakarta agreed cut fuel subsidies, ratchet up banking and financial sector reforms, and dismantle monopolies held by Suharto's friends and family.

Suharto had told the IMF he did not want to lift the subsidies until Athe right moment.'' Fund and U.S. officials understood that moment would follow his confirmation by parliament as president for another five years. Suharto was confirmed in March, agreed to a new deal in April, got one billion dollars May 4, and cut the subsidies. Then all hell broke loose.

Rioting throughout the country culminated in a day of violence Friday May 15, when 500 people were believed to have died in Jakarta alone. The government said the same day prices of various fuels - having been raised between 25 percent and 71 percent - would be lowered between eight percent and 20 percent.

The bail-out had broken down again. IMF staff left Indonesia, following evacuations by foreign embassies and companies, and an IMF mission to Jakarta scheduled for the weekend of May 16-17 was postponed. The United States - the Fund's largest shareholder - and European countries delayed payment of 1.4 billion dollars in bail-out funds from the Asian Development Bank.

U.S. officials said privately the IMF's macroecon-omic assumptions and targets likely would have to be revised and that, in any case, the next one billion dollars in IMF money, due in early June, probably would be put off. (They said so publicly the following week, and the World Bank on May 18 scrubbed an executive board vote, scheduled for the following day, on a one-billion-dollar structural adjustment loan as well as 225 million dollars for poverty alleviation programmes.)

Nevertheless, the programme itself Ais still very much appropriate for Indonesia's economic situation, and for restoring confidence and bringing about a resumption of economic growth,'' an IMF spokeswoman said May 15.

 "We are monitoring developments in Indonesia closely and hope that all sides will exercise restraint,'' the IMF spokeswoman said. "We do not, however, feel it would be appropriate to comment at this stage on what are internal political issues.''

The IMF had weighed in on those issues by pushing its wide-ranging reforms and officials had acknowledged some measures would meet popular resistance. But they had insisted it was Jakarta's job to deal with the fall-out.

"It is paradoxical that the IMF is willing to dictate terms to Suharto when it comes to managing the economy but not when it comes to fundamental economic rights,'' an Indonesian human rights worker and researcher using the pseudonym 'Aryati' told a Congressional committee early this month.

AWhile it is apparently acceptable to the IMF that political power is monopolised, it absolutely insists that the debt be democratically distributed,'' Aryati added.

Economic development had become the government's religion, she told lawmakers. ABut what do we have to show for thirty years of development? Two hundred families have fat Swiss bank accounts while millions...have had their land expropriated....And we have not heard their laments precisely because there has been no freedom to criticise what the state calls its development programme.''

The IMF has been complicit in muzzling dissent because it has required political stability, not reform, according to Emmy Hafild, executive director of WALHI, the Indonesian Forum for the Environment.

Western and Asian officials, seeking to prop up the programme, had held talks with Suharto's government but declined to meet independents or the opposition, Hafild said. As a result, they had strengthened the notion that only Suharto - and repressive elements within the government - could guarantee that stability.

By May 15, U.S. officials suggested Suharto may have become too weak to implement the IMF programme - but upheld its goals. Indonesia needs Aa vigorous programme of economic reform as proposed by the IMF and political reform shaped through dialogue between the government and its citizens,'' said State Department spokesman James Rubin.

But what of the programme itself? Since December, World Bank chief economist and Senior Vice President for Development Economics Joseph Stiglitz repeatedly - if sometimes indirectly - has assailed the IMF effort as off-target because it is aimed at government fiscal and monetary policy in countries with some of the world's highest savings rates and most conservative fiscal policies.

Worse, the programme has courted full-scale depression by driving down social spending even as it added to the erosion of citizens' incomes (for example, by insisting Indonesia export its way out of trouble and emphasising cheap labor as 'competitive'). AVirtually every American economist rejects the balanced-budget principle during a recession,'' Stiglitz said earlier this year. AWhy should we ignore this when giving advice to other countries?'' He has since insisted his remarks were intended to spur academic debate.

Indonesia's debt problem, even IMF officials agree, stems from the private sector, which owes in excess of 70 billion dollars to overseas lenders. However, the Suharto regime, using opaque accounting practices, had quietly funneled money from its reserves to shore up those loans, fueling the crisis.

Foreign banks that now want their money back from Indonesian companies so far have failed to resolve their claims using a formula applied in Mexico in the early 1980s.

Few disagree that Indonesia must dismantle its 'crony capitalism' but, according to the editors of 'Business Week' magazine, in a commentary addressed to the IMF, ATo restart its economic engine, Asia needs deep structural change that promotes markets and breaks up elite power, not out-of-date contractionary policies that put common people out of work.''

Eight million Indonesians are without jobs and 12 million are expected to have been laid off by the time the IMF's restructuring takes full force. There are five dependents to every worker, according to demographic data. Prices rose 25 percent in the first quarter of this year alone.

The proportion of Indonesians living below the international poverty line of one dollar per day has fallen from around 60 percent to 11 percent over the past 30 years, according to the World Bank. But most of those boosted out of absolute poverty ended up with only about two dollars per day - in rupiah, of course, which dropped 20 percent in value in the week to May 15.

Abid Aslam covers international financial institutions for Inter Press Service in Washington. This article, originally written on May 17, was adapted with permission.