"ATTENTION ALL LOAN DEFAULTERS! Last Chance--Pay Up or Face the Consequences."

Today's front-page newspaper ad, placed by Pakistan's largest private bank, was one of the first visible signs that Gen. Pervez Musharraf, Pakistan's new military ruler, meant business when he vowed Sunday to pursue the debtors, tax evaders and other financial scofflaws who have helped drive Pakistan's economy nearly into the ground.

And tonight, when the news came out that Redco, a textile enterprise owned by a now-detained former senator, had agreed to repay some of the 1.2 billion rupees ($23 million) loan that was long in default to another Pakistani bank, people began telling themselves that Musharraf's ambitious reform agenda just might take wing.

"In a single day, look what has happened. I definitely think it will spread," said Tariq Awan, 30, who works at a management sciences institute here. "They say more than 200 billion rupees [$3.8 billion] has been looted from this poor nation. If Musharraf can get even some of it back, it's an excellent start."

Many Pakistanis, however, are deeply skeptical that the general, who deposed Prime Minister Nawaz Sharif last week and dissolved parliament in a bloodless coup, will be able to recover much of the lost money. They are even more doubtful he will get at the roots of financial corruption, crony capitalism and bureaucratic resistance to change that have become deeply entrenched in Pakistan's economic life.

Despite Musharraf's initial gestures, such as pledging to make his own assets and tax returns public and giving loan defaulters until mid-November to come forward, many people fear he will be unable to follow through with deeper and long-term reforms. He has yet to announce a team of economic advisers. And many worry that if his plans bog down, the military may be tempted to use even harsher methods or remain in power indefinitely, a development that could threaten the stability of this populous south Asian nation that last year became a nuclear weapons power by exploding a test device.

Among the many obstacles facing the military regime is its unavoidable dependence on the expertise and cooperation of the same bureaucracy it has pledged to clean up. Moreover, some warn, the harshness of the measures Musharraf has initiated to make an example of financial lawbreakers might end up scaring away the very investors Pakistan needs to reduce its dependence on foreign assistance and begin to turn the economy around.

"There is a big Catch-22 here. The people of Pakistan feel cheated, and that wealth has to be recovered. But once you create a witch hunt, you start to erode confidence," said Tariq Saigol, the chairman of one of Pakistan's largest textile and cement conglomerates. "People want across-the-board accountability, but the government has to show some discretion. For Musharraf, that will be the billion-dollar question."

There is widespread agreement among Pakistanis that "the system" needs to be radically overhauled, and that Musharraf is sincere about wanting to reform it. Many observers feel that after 12 years of failed democratic governments, during which the economy has continued to spiral downward, a military takeover was the only hope for restoring credibility and honesty to government institutions and private enterprise.

In the past week, much public attention has been focused on a handful of major corruption and default cases, many of them involving recently ousted top officials and their allies in private business. Sharif and his relatives, for example, are reported to have looted millions of rupees from the country via unsecured loans and business profits stashed abroad.

The new regime has frozen these officials' accounts, detained some and prevented others from leaving the country. Sharif, who is in military custody, may soon face corruption charges.

According to many people, a more far-reaching drain on the economy is the pervasive corruption that affects thousands of smaller daily transactions--from having a telephone lineman demand a bribe to install a phone to buying a television set that has been smuggled into the country without any taxes or duties being paid. Such practices are so widespread, they say, that even honest people are sucked into the system. The United Nations estimated last year that more than 100 billion rupees, the equivalent of about $1.9 billion, is lost to the economy annually through corruption.

"On paper, what Musharraf is doing looks good, but the problem is so rampant that things need to be changed from top to bottom," said Amir Wahid, 29, an architect in Lahore. "A telephone is supposed to cost 4,500 rupees [$85], but unless you pay twice that it will take three years and countless complaints to get. No matter how hard you try to stay clean, you are pushed into the system until it takes over your life."

According to economists and businessmen, major legal and structural changes are needed, including radically reforming the tax system, curbing the systematic smuggling of imports and privatizing a number of ailing public industries. But in the process of correcting such problems, they said, Musharraf's government may inflict more damage on the tottering economy than it can stand.

One major banker and industrialist, who asked not to be named, said he was already worried that the new regime is frightening off investors. Several days ago, he said, he tried to leave the country on a business trip and discovered he was on a list of wealthy Pakistanis now barred from foreign travel. "I am not in default on any loans. I am a major earner of foreign exchange, and I am being stopped at the airport," he fumed. "People in this country are hungry for good governance, but I would rather have 10 defaulters go free than bring down the morale of the business community."

On the other hand, there are signs that Musharraf's proposals may be attracting foreign investors who were scared away by Sharif's erratic economic policies. During Sharif's 31-month tenure, foreign investment fell from $1.2 billion to $360 million per year. But since the coup, U.S. diplomats in Islamabad report that, much to their surprise, they have begun receiving calls from U.S. firms seeking investment advice.

Even some Pakistani businessmen who have profited handsomely in recent years say they welcome Musharraf's arrival as a chance to put the country's economy back on track.

"This is an opportunity here to put the house in order," said Saigol, an old friend of Sharif's whose family enterprises have long been one of Pakistan's largest industrial groups. "We can't just blame Nawaz Sharif. The country has been suffering from a collective malaise for the past 15 years. We need to resolve some basic structural issues and undertake some serious reforms. I don't care who does it, a civilian government or this new government, as long as they do it."

Special correspondent Kamran Khan in Karachi, Pakistan, contributed to this report.