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January 31, 1994
. Vreme News Digest Agency No 123
An Economy of Chaos

Recognizing The Goal

by Zoran Jelicic

Of course, no one in their right mind should object to the state's collecting of foreign currency reserves. It remains to be seen however, if this will be the only consequence of the announced reconstruction of the monetary system and the recovery of the Yugoslav economy. It depends on the will of the authorities, primarily those in Serbia, if a normalization of the economy and state really started on January 24, or if a new element has just been added to the well-known chain starting with old foreign currency accounts followed by an incursion into the payments system followed by marauding banks and taxation via hyperinflation. Those who doubt the power of the authorities need only stop and think a bit: when the printing of the dinar stopped, monetary insanity left the streets. This brings to minds persistent statements by officials claiming that hyperinflation is the result of sanctions and not of excessive printing of money.

The population and economy have no reason to forget that the authorities, according to calculations made by Belgrade University professor Pavle Petrovic, took from them 2.5 billion US dollars through hyperinflation. However, it wouldn't be fair if we were to judge the fate of Dragoslav Avramovic's anti-inflationary program just by this fact.

After the first four days of the new dinar, the authorities can be satisfied, and more or less the same can be said for most of the population. The new dinar has not had a bad welcome: on Monday the black market asked two DEM for one new dinar, but this soon dropped to the official rate of the dinar to the DEM, and where there are differences, they range from 1.31.5 dinars for one German mark.

The first few days saw a return of goods to the shelves and a drop in prices, very shyly at first, and of a great variety. Superficial estimates say that price of goods and services have dropped by 10%80%. However, the prices of the same goods vary greatly. It would not be realistic to expect more in the first few days, not even with better preparations. What is important is that a tendency towards a normalization of economic life can be discerned.

On the other hand, there are numerous counts of criticism from the economy. Bankers fear that the greatest burden of stabilization will fall to them, even though their capital melted away last year. Producers and traders underscored the difficulties they encounter because of the daily changes in the rate of the old dinar, and they demanded that the state look after its business and not meddle in their affairs. Transportation workers have postponed for a short time the implementation of high taxes (faced with the real threat that passengers will be taken over by firms from Bulgaria and other neighboring countries), and they all point to the great tax burdens (above all, the double taxing of all financial operations), and the scandalous retroactive implementation of regulations.

With regard to this, the most drastic example are the new taxes affecting firms and shops. From the economic point of view, it is not clear why the authorities are trying to dip deeper into the pockets of over 130,000 private firms, when a layman understands that it was precisely these firms which helped alleviate the blunders of the ruling policy in the previous years: they didn't ask for social help, or salaries for not working, they managed as best they could, finding work for themselves and others, they increased the demand and real wagesand they didn't grab a large enough piece of the overall economy to challenge the state-ownership mentality of the authorities. It must be repeated that Yugoslavia is a world phenomenon in that it has more privately-owned firms than it has people working in them. Another piece of economic nonsense is the equal taxing of all firms involved in one particular branch, regardless of the profits they make. This is why a mass closing down of firms can be expected, and their illegal work wherever possible; the moving of firms abroad (including Montenegro), and a new symbiosis with the new tax and other inspectorates in short, all that which will leave the state without income from taxation.

Everybody is affected by the price of services rendered by the state. Pensioners were happy for a while their pensions had gone up more than ten times, but this happiness was short-lived, because electricity, rents and telephone bills have also gone up. It remains to be seen if a solid pension of 50 odd new dinars (or 50 DEM) will be enough to cover just these three items of the family budget.

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