The government can fund this only by cutting subsidies and critical social programs, or by seeking additional foreign financing. Foreign financing roughly equal to the fiscal deficit will also be needed in 1999-2000. Deal with the debt overhang. The overhang of private sector domestic and external debt, together with the depreciation of the rupiah, has paralyzed many enterprises. Restructuring this debt is one of the highest priorities.
Some steps already are under way.
Resuscitate the banking system. The worsening crisis has increased the banking system's financial troubles to the point where the viability of the rest of the economy is threatened. Measures will have to be implemented to help relatively sound banks restore credit flows and become a core for future banking operations. The Indonesian Bank Restructuring Agency will have to be put on a sustainable footing, by providing it with adequate resources and qualified personnel so it can become fully effective. The agency's asset management unit must be set up as quickly as possible, using fair and transparent procedures for asset acquisition, sale, and resolution.