The government led by Susilo Bambang Yudhyono, the Indonesian president, has defended the bailout of Bank Century, saying it was needed to prevent wider damage to the economy and protect Indonesia for the global financial crisis.
But the opposition has said the bailout drained money from state coffers that could have been used to boost infrastructure, while some of the money was diverted to Yudhyono’s political party.
His vice president, Boediono, and finance minister, Sri Mulyani Indrawati, approved the bailout and opposition leaders have demanded their resignation saying they must be held accountable for losses to the state.
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The controversy over the bailout has been depicted as the latest battleground in a war between reformers and non-reformers, including some member of the ruling coalition, who are opposed to tackling corruption and overhauling Indonesia’s civil service, police and judiciary.
The scandal has risked being particularly damaging for Yudhoyono, who was elected in July 2009 for a second five-year term on a campaign promise to stamp out rampant corruption.
On Monday the positions of both Boediono and Indrawati appeared to be strengthened after the president said that he took personal responsibility for the decision to bail out Bank Century, now known as .
Fauzi Ichsan, an economist at Standard Chartered bank in Jakarta, said Yudhoyono’s announcement would likely prove problematic for the inquiry.
“I think [the inquiry team] will be confused now because they have to blame the president too, but that is going too far,” he told Reuters news agency before Tuesday’s parliamentary session.
“In terms of political strategy, this could actually benefit Yudhoyono. This is something that the inquiry team has not expected.”