ABSTRACT
In the first half of 1997, the Indonesian economy seemed to be performing very well. Inflation, having averaged a moderate 9% per annum since the early 1980s, had been reduced to 6% in 1996 and to 5.1% in the year to June 1997. Output grew rapidly in the year to June 1997, by 7.4%, and investment grew by 16.5%. The budget had been managed in a conservative manner for years – so much so that the government had built up a nest egg estimated at US$11 billion (before the float) in banking system deposits (McLeod 1997b: 12–13), and was able to prepay a small but significant amount of its outstanding debt in 1996.
