Suharto has been dogged by ill health in recent years

Abdul Rahman Saleh said the decision was made on health grounds. Mr Suharto, 84, had surgery earlier this week and has been in poor health for some time.

The move comes just hours after current leader Susilo Bambang Yudhoyono said he was postponing any action.

Mr Suharto is accused of embezzling millions of dollars in state funds.

RISE AND FALL OF SUHARTO Born in Java, June 1921 As army minister, plays a central role in helping Sukarno overcome a coup in 1965 Becomes president March 1967 Modernisation programmes in the 70s and 80s raise living standards East Timor forcibly annexed in late 1975 Asian economic crisis of the 1990s hits Indonesian economy Spiralling prices and discontent force him to resign in May 1998 Judges rule he is unfit to stand trial for corruption in 2000

"The graft case against the defendant, Suharto, has been closed. Based on a health check by his team of doctors, Suharto's health is not good, his condition deteriorates," Attorney General Abdul Rahman Saleh told reporters on Friday.

For days there has been speculation that the corruption charges against the ailing former leader would be formally dropped.

But earlier on Friday President Susilo Bambang Yudhoyono appeared to want to quash such talk, saying the issue was threatening to divide the nation.

Mr Yudhoyono said he had come to the view that now was not the right time to take a decision on the legal status of Mr Suharto.

President's role

Mr Saleh said his conclusions are designed to help Mr Yudhoyono come to a decision.

"The decision will be part of materials being used by the president in carrying out his decision because I heard it this morning that the president would like to hold off this matter. Hopefully this will be the material the president needs," he said.

The attorney general has held open the possibility that the letter closing the case against Mr Suharto could however be revoked if new reasons came to light.

Lawyers, however, say it is up to prosecutors whether or not they pursue a case.

The charges against Mr Suharto were first brought six years ago, but the accused has so far avoided trial because his lawyers argue that a series of strokes have left him mentally incapacitated.

He is accused of embezzling at least $600m (�322m) from the state during his three decades in power, a charge he denies.