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Saturday, November 1, 1997 Published at 16:39 GMT



Business

Indonesia closes 16 banks

Banking is one of the weakest areas of the economy

The Indonesian government has announced the closure of 16 banks as part of a programme of reforms linked to a financial aid package from the International Monetary Fund worth at least $23bn.

The aid is being offered by the IMF to try to restore confidence in the Indonesian economy, after steep falls in the Indonesian currency and stock market.

The inclusion of bank closures in the IMF reform package was widely expected. Indonesia's overcrowded banking sector has long been known as one of the weakest areas of the economy and after dramatic falls in the value of the Indonesian currency, many banks were already facing closure.

But, by targeting banks with strong political connections, the government is hoping to reassure nervous investors that it is genuinely keen to improve openness and cut back on corruption in the economy.

The package also includes tariff reductions and the abolition of monopolies held by friends of President Suharto.

It is one of the largest to have ever been awarded to Indonesia and the IMF clearly believes Jakarta is ready to implement the required reforms.

But the markets may still want to see further details on controversial policies like the national car programme, which gives tax breaks to President Suharto's youngest son, Tommy, to make a car called the Timor.








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