The Asian economic crisis has leftIndonesia's Government deeply in debt. Government debthas increased from 23 percent of GDP before the crisis toabout 83 percent of GDP in early 2000. Nearly three quartersof this increase is domestic debt to pay for bankrestructuring. Though very large, the government's debtis manageable. Actions to rebuild investor confidence, keepreal interest rates down, and renew growth are necessary.Moreover, actions are also needed in the following areas: 1)generating significant primary fiscal surpluses; 2)containing off-budget losses and counteracting fiscal risks;3) aggressively selling government assets to reducegovernment debt; 4) rescheduling existing debt underinternational rules and seeking the best possible terms fornew borrowing; 5) building capacity to manage debt well; and6) establishing an effective domestic bond market. Thereport concludes that Indonesia can overcome its governmentdebt burden with renewed growth and prudent fiscalmanagement. But this will not be easily or quickly achieved.Sustained fiscal surpluses and asset sales will beimportant. So will actions to avoid additional newgovernment debt and strengthen debt management capacity.
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