S&P also said that the bailout program would place a major fiscal burden on whichever government is formed in the wake of Monday's parliamentary vote. The agency's restructuring-cost estimate of $ 87 billion is 24 per cent higher than the government's estimate and will continue to grow unless quick action is taken to rehabilitate Indonesia's state banks, which hold half the country's deposits, the agency said.

S&P advised Jakarta to step up its efforts to recover debts from delinquent borrowers and to push ahead with its recapitalisation program. This month Indonesia issued 103.81 trillion rupiah ($13.19 billion) of bonds to recapitalise 23 banks - seven private, four nationalized and 12 provincial banks.

The government is to begin issuingadditional bonds to bailout Indonesia's four state banks sometime during the second half of this year, though S&P is advising that it do so sooner. "The longer it takes, the bigger the bill," said Terry Chan, an S&P director in Singapore. The agency expects non performing loans in Indonesia's banking sector to reach 75 per cent to 85 per cent of all outstanding loans by the end of the year, also driving up the bailout costs.

In comparing Jakarta's bank-recapitalisation bill to other crisis-hit Asian nations, Indonesia's is now by far the costliest - in terms of percentage of gross domestic product. Thailand's equals 35 per cent, South Korea's 29 per cent and Malaysia's 22 per cent. S&P said it "may take a decade" for Indonesia's financial system to recover. Political parties barely touched the banking issue in the three-week campaign period that ended June 4 -- mainly because solutions are so difficult to find.

The country is already $60 billion in debt, and adding on the banking costs means millions ofimpoverished Indonesians will be forced to help cover them through higher taxes. It is an issue for which many politicians don't have answers.

"We know full well how bad the banking crisis is. That's why we don't have any clear solutions," said Kwik Kian Gie of the Indonesian Democratic Party-Struggle, or PDI-P. The party is leading the parliamentary polls, though only a small portion of the vote has been counted thus far.

Indonesian banking officials are placing their hopes for recovery on falling interest rates and improving investment sentiment. Since the beginning of the year, the central bank's one-month rates have fallen more than 15 percentage points to below 25 per cent, and the Jakarta Stock Exchange has jumped nearly 60% as investors believe the nation's political crisis is ebbing. Such an improving economic climate could reduce the banking-bailout cost significantly, as recovering businesses start repaying their borrowings.

Under IMF's guidance, Indonesia is also intensifying its efforts torecoup the bad loans. Last week the banks revealed their 200 largest debtors, many of whom are family and friends of former President Suharto. The hope is that a new government - free of connections to many of these business people - will be able to more vigilantly recover debts.

Indonesian bank denies leakage

JAKARTA: Indonesia's bank Lippo today denied leaking confidential details of attorney general Andi Ghalib's accounts to a corruption watchdog which has acccused the top law official of accepting bribes.

Bank Lippo took out advertisements in four of the country's main newspapers saying the information regarding Ghalib's accounts had not come from a leak. "Based on internal investigation conducted so far, it can be concluded that the material circulated and reported to the people regarding the accounts in the name of Andi Muhammad Ghalib and Andi Murniati Ghalib at Bank Lippo, did not originate from and was not issued by Bank Lippo," the notice said.