Justice Minister Muladi, who made the announcement, did not say which prisoners would be released. He was speaking after meeting a visiting official of the International Monetary Fund.

The official, Hubert Neiss, earlier warned the government that economic reforms would only succeed if political stability returned following the resignation of President Suharto last week.

The IMF is debating whether to resume paying Indonesia the second instalment of a sorely-needed $43bn rescue loan package, which was suspended in March because of concerns that Jakarta was reluctant to implement IMF reforms.

Some analysts say the deal may have to be renegotiated because the country's economic crisis has deepened since it was agreed. Mr Neiss, the IMF's Asia Pacific director, has been holding a series of ministerial meetings to assess Indonesia's position. He is due to report back to the IMF board next week.

Earlier, in talks with President Habibie, opposition leaders recommended that elections should be held within six to twelve months.

They said Mr Habibie had responded positively, although a senior government minister is reported as saying that the election could be at least a year away, given all the preparatory legislative work that needs to be done.