The amounts governments need to raise or cut could be substantial. And it will need to do even more if it wants to start paying down the debt. Malaysia appears to have the least troublesome deficit and debt pressures, though there are sceptics. Thailand may have more of a problem than people think. Still, Tarrin and other Thai officials are confident the government can over time reduce its annual deficit and bring the budget back into balance.
Somebody has to pay for filling in that hole, either government departments or taxpayers.
The scale of Asian governments' debt will depend on the actual costs of the bank bailouts, which, in turn, will depend crucially on the success of crisis governments in recovering bad loans. Worryingly, the World Bank warns in its annual global forecast published this month that estimates by Asian crisis countries of how much they will get back are too high compared with banking crises elsewhere. Nobody seriously doubts that Asian economies, except perhaps Indonesia, can make the painful adjustments needed to get debt under control. By increasing the government demand for funds they raise interest rates and, hence, crowd out private investment. Government flexibility to act in a countercyclical manner is reduced.