Shoeb Kagda – High-level government audit has implicated senior members of the former Suharto administration of siphoning off billions of dollars of state funds. The report comes against the backdrop of a political showdown between President Abdurrahman Wahid and Indonesia's Parliament.

Sources told The Business Times that the audit was carried out by the State Audit Board and independent auditors appointed by the International Monetary Fund (IMF), which has been pushing the government to clean up rampant corruption in the country.

"It is a damning report of a lot of past government officials and private bankers who helped bankrupt the central bank and empty the government's coffers," said the sources. "The report is so obvious that the government has no choice but to investigate the individuals implicated in it."

The 3,000-page report, BT understands, clearly identifies billions of dollars that went missing during the last five years of Mr Suharto's term as president. The former ruler stepped down in May 1998 after he was unable to control riots that spread through the capital and after his top Cabinet ministers handed in their resignations.

Mr Suharto's successor, B J Habibie, stonewalled all investigations of alleged fraud but the State Audit Body got the go-ahead when Mr Abdurrahman took office in October 1999. "The government will implement the full force of the law according to the information in the report," said the well-placed sources. "Those whose legal status is threatened are now trying to shake down the government."

These individuals allegedly include former ministers, heads of state-owned enterprises, finance officials and high-level civil servants.

According to the report, a sizeable amount of money was transferred out of the central bank and other government departments without any legal basis or records. Records kept during this period were also often incomplete and did not match the actual amounts disbursed.

Meanwhile, the tussle between the president, who in recent days has said publicly that he has approved the investigation and possible arrest of up to 10 legislators, has unnerved Jakarta's financial markets. The rupiah has lost nearly 21 per cent of its value since the start of the year and yesterday touched the 9,000 mark against the US dollar before recovering slightly to close at 8,955. The benchmark Jakarta Composite Index also felt the jitters although it was helped by some bargain-hunting to close 5.4 points higher at 509.26 points.