Kuala Lumpur's homegrown fiscal and economic measures, including pushing mergers among financial institutions, may not instill the needed confidence. Still, an IMF credit program is not a silver bullet. There are fears that the Fund may be prescribing such radical surgery that the patient may well expire on the operating table. He wants the Fund to review the policy of high short-term interest rates. But Suharto announced a plan that only balances spending and revenues because of worries that a tighter clampdown may trigger riots.
Social instability is a legitimate concern.
The IMF hints of flexibility on fiscal targets, but it is adamant about structural reforms. Sandra Lawson of Goldman Sachs urges other reforms. With a freer press and a more transparent system, the mistakes will not be repeated. In the short term, additional outside assistance may be needed. The governments of North America and Europe must help in a big way because if they don't, their own economies could get hurt.