Geoff Spencer, Jakarta – Indonesia shut down 16 insolvent banks and planned other austerity measures Saturday, a day after receiving word of $33 billion in foreign loans to revive an economy hit hard by financial declines across Asia.
Finance Minister Mar'ie Muhammad called for calm and stressed the government would reimburse depositors.
"These banks are insolvent to the point of endangering business continuity, disturbing the overall banking system, and harming the interests of society," he told reporters. He said the nation's 224 other banks would open as usual on Monday.
The move came after the International Monetary Fund announced what was its second-largest rescue package ever, $23 billion. Singapore and Japan said they would add another $5 billion each.
The government said it would announce further changes to its besieged economy on Monday. In exchange for the loans, Indonesia has apparently agreed to cut government spending and lower trade barriers, which could spell the demise of some inefficient state monopolies.
Until a few months ago Indonesia was among Asia's fastest growing of economies. But steep falls in currency and stock values across the region sent the economy spinning downward, a situation aggravated by wild swings in financial markets around the globe last week.
Indonesia, the world's fourth most populous nation, has recently been rocked by a series of riots and protests over the economic ills.
In an apparent move to head off more unrest, Mar'ie said the government would refund deposits up to $5,700 and refund larger deposits as best it could by using liquidated bank assets.
Some of the closed banks have close links to the government of President Suharto, a 76-year-old retired five-star army general who has governed for 32 years. They include Bank Jakarta, owned by Suharto's half-brother.
Analysts said the decision to take on the banks was long overdue and was a sign that government might be serious about more far-reaching reform.
Indonesia last month became the third Asian nation this year to seek IMF assistance because of currency turmoil. In July, the IMF approved a $1 billion loan for the Philippines and in August put together a $17.5 billion package for Thailand. The biggest IMF loan, $50 billion, went to Mexico in 1995.
Suharto, who goes by just one name, has tolerated little political dissent, but until now has been able to deliver sustained economic development.
Critics complain that the Indonesian economy is dominated by a small group of his family members and close associates.