President Suharto of Indonesia will be announcing the government's annual budget on Tuesday at one of the most critical points in the country's economic development. The collapse of the Indonesian currency, the rupiah, has left many businesses unable to repay their foreign debts and economists are predicting the worst recession for thirty years. As our Jakarta correspondent, Jonathan Head, reports, the government now has to make some very tough decisions to try to deal with the sudden reversal of Indonesia's economic fortunes.

Dramatic fluctuations in the value of the rupiah have left many Indonesians in a state of shock. The currency has now fallen to just one third of its value against the US dollar a year ago.

People can no longer afford to buy imported goods and even basic food items, like rice and vegetables, have shot up in price. But there's unlikely to be much for them to cheer about in this year's budget.

The government is facing much lower tax revenues from businesses which are close to collapse under a mountain of foreign debt and the government's own debt repayments will be much higher as well. It will reap some benefits from the rupiah's devaluation.

Its income from oil and gas, normally measured in dollars, will be worth more in local currency but under the strict terms imposed by the International Monetary Fund in return for a twenty-three billion dollar aid package, Indonesia has to balance its budget, or even achieve a small surplus. That may mean spending cuts in a country where government money has always been an important source of income and employment.

Civil servants are likely to see their already small salaries frozen and there's even talk of reducing subsidies on sensitive items like fuel. Military chiefs here are already warning of increased levels of unrest as the recession begins to bite.