Louise Williams, Indonesia's Finance Minister has appealed against a court decision allowing a bank controlled by President Soeharto's half-brother, Mr Probosutedjo, to remain open despite being included in the liquidation list under the International Monetary Fund's bail-out package.

The Finance Minister, Mr Mar'ie Muhammad, and the Governor of the Central Bank, Mr Sudrajad Jiwandono, lodged the appeal with the Jakarta State Administrative Bank, which ruled this week that the bank may remain open pending a final decision on its liquidation.

Analysts warned yesterday that the court decision had weakened the processes essential for recovery, as the rupiah again weakened after the downgrading of Indonesia's foreign debt to "junk" status by the American credit assessor Standard & Poor's.

"This development is a setback for the reform program and may undermine the Government's attempts to close more banks," said Mr Stephen Rogers, the head of research for UBS Securities.

The Finance Minister ordered the liquidation of 16 ailing banks on November 1 in the first round of reforms under the International Monetary Fund's $US38 billion ($58.5 billion) bail-out package.

Analysts have warned that any signs that the politically well-connected are not willing to share the pain of economic reform will further damage confidence in Indonesia's economy.

The rupiah fell yesterday to 6,150 to the US dollar, from 5,450 at the close on new year's eve.