Indonesia deal aims at fighting hunger

INDONESIA AND the International Monetary Fund yesterday signed a fresh deal aimed at salvaging the stricken economy, but warned that an extra $4bn (pounds 2.4bn) to $6bn in loans was needed to repair the damage caused by weeks of social and political upheaval.

Forced back to the drawing board after Indonesia's descent into mass violence last month swept away their April deal, they warned that the economy was now expected to shrink by at least 10 per cent this year, and a $41.2bn bail-out package already in place was no longer enough.

While previous agreements concentrated on economic reform, the new deal has a more fundamental focus - fighting the hunger and deprivation suffered by Indonesia's poor and providing a safety net.

"The most urgent priority is to repair the distribution system and ensure adequate supplies of food and other necessities to all parts of the country," the agreement signed by Indonesia said.

Subsidies on food and essential commodities, which the IMF wanted to be scrapped in previous deals, will now remain in place until the economy recovers.