Has Suharto Backed Down?

As with the Iraq deal, Washington is "cautiously optimistic" over reports that Indonesia has backed down from defying the International Monetary Fundover the "currency board" issue -- but it wants details. "The IMF is waiting to discern exactly what Suharto plans to do," says TIME business correspondent Bruce Van Voorst. "There's a degree of optimism that what could have been the worst confrontation between the IMF and a beneficiary country may have been avoided."

The international body had been alarmed at Suharto's plan to peg the rupiah to the dollar, which would force up interest rates and bring even greater economic hardship to a nation already in the grip of mounting social turmoil. President Clinton on Friday called Suharto -- for the second time this month -- to urge him to comply with IMF requirements for the $43 billion bailout of Indonesia. "Suharto is sitting on a political volcano," says Van Voorst, "which is why it's not easy for the IMF to simply pull the plug on its promised bailout. The collapse of Indonesia's economy could have disastrous implications throughout the region and internationally." And with unemployment spiraling and almost daily riots over price increases, even the IMF's medicine may take some time to stabilize the patient.