The start of talks between government officials in Indonesia and the International Monetary Fund has produced cautious optimism that the country's economic crisis can be eased.

With fears of social unrest escalating, the IMF worked on Sunday to persuade the government in the world's fourth most-populous nation to honor its commitments to financial reform.

But beyond those pledges, which enabled the country to secure the IMF's $40bn bailout package, many analysts are calling for an opening up of the country's cosy political environment so that power is shared rather than hoarded.

"This is just the beginning," IMF deputy chief Stanley Fischer said after a three-hour meeting with senior Indonesian officials.

The BBC's Simon Ingram reports from Jakarta (Dur: 1-14)

On the markets, the Indonesian rupiah was pinned at 8,800/9,300 per US$, having swung from 10,200 to 7,600 and back again on Friday.

Elsewhere, the Australian and New Zealand share markets fell sharply, while bond prices powered to new highs as investors bought safety.

Tokyo and other Asian stockmarkets were expected to follow, with only the size of the falls uncertain.

Talks 'fruitful'

Indonesian Finance Minister Mar'ie Muhammad described the IMF talks as "fruitful, productive and impressive." State Secretariat Minister Murdiono said Indonesia was "committed" to the reforms.

Fischer's most important, and likely most difficult, mission is on Monday, when he meets President Suharto. The 76-year-old former general is Asia's longest-serving leader and is expected to seek a seventh consecutive five-year term in the March elections.

The IMF party will travel to Malaysia on Tuesday, while the IMF's Managing Director Michel Camdessus will travel to Indonesia on Wednesday to step up the international pressure on President Suharto.

Nation in turmoil

The nation of 202 million people and 17,000 islands with huge oil, gas and mineral wealth is in turmoil. It is trapped in an Asian crisis of confidence in which once booming economies have crashed in recent months.

Unemployment is expected to soar to 6.5 million by the end of the year. The national debt is a $133bn. Hundreds of companies face bankruptcy. The stock market has tumbled and inflation, now more than 11%, is set to rise.

There have been demonstrations against President Suharto

After losing 70% of its value in the past six months, the rupiah dived even lower last week amid fears that the IMF bailout was threatened by Suharto's apparent unwillingness to adhere to its strict conditions.

Panic spilled into the streets, as shoppers stripped stores and markets of rice and other staple foods. Under pressure from Washington and the IMF, Suharto's government on Saturday postponed 15 major building projects.

Union fears over IMF policies

Asian trade union leaders meeting in the financial sector have strongly criticised the IMF's policies for the region.

The unions issued their statement at the end of a three-day meeting in Kuala Lumpur, saying: "These policies threaten the economic, political, industrial, social and ethnic stability of the region."

"At their worst, the IMF policies can be seen as an attempt to impose upon a country and a region, economic and social values which are inappropriate and threaten to undo decades of economic growth, social development and ethnic cohesion," the statement said.

The summit, organised by the International Federation of Commercial, Clerical, Professional and Technical Employees (FIET), included representatives from Japan, South Korea, Singapore, Thailand, Vietnam, the Philippines, Indonesia and Malaysia.

The statement noted that "the IMF's standardised and intransigent policy approach fails to neither recognise nor understand the economic realities of the region and the causes of the current debt problems."

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