The Fate of the "Avram"

The state is determined to defend the stability of the new dinar, said National Bank of Yugoslavia (NBJ) Governor Dragoslav Avramovic at the end of a meeting with nearly two hundred businessmen and domestic and foreign journalists. He added that Yugoslavia was a complex state - with its three governments and many centers of power, so that it wasn't always clear from which side the "wind was blowing". Avramovic is still surprised by the fact that the leading forces in the country have not met yet to discuss important moves aimed at stabilizing the national economy and money. He reiterated that he was an optimist as regards the dinar's chances of remaining stable.

A drama, or rather, something that threatened to turn into a dramatic situation started two weeks ago, with the return of "stizung", a term used to describe the drop in value of the national currency in transactions between firms. The dinar lost 10% of it value in such transactions, so that the German mark was worth 37% more than the dinar, at the beginning of the week. However, the 'price-push' of foreign currency stopped in the middle of the week, and the dinar's value returned to the official rate set by the NBJ. In the meantime, changes occurred on the goods market: there were discounts, i.e. two price rates - for the domestic and foreign currencies. Some street dealers refused to accept the dinar, and the price of food went up at the green market.

The majority of businessmen contacted by VREME at the start of the week, i.e. when the value of the dinar started dropping dangerously, believed that the state and its unwarranted interference in market trends were to blame. The matter concerns the following: firms cannot buy foreign currency without a number of permits, especially those dealing in foreign trade. For this reason a large number of businessmen opted for a short cut, and started reviving the black market. The state reacted swiftly. Preparations are underway for interventions from the state's foreign currency reserves, but it is still not known with what sum and when, the state will defend the dinar. It was officially said on Wednesday that the state's foreign currency reserves had increased by over 240 million German marks, and that 20 million dinars had been sent, i.e., sold to the two Serb Krajinas (in Bosnia and in Croatia) according to rates and conditions in force across the Drina River.

The dinar's current and temporary vacillating contains elements which could be crucial for the whole anti-inflationary project and the introduction of a healthy national currency. In normal economies, the state does not have ambitions of controlling practically everything. The state does not discourage businessmen, and encourage state firms to raise the prices of their services, which is, in fact, just another way of filling the state's coffers. In this respect, it is symptomatic that Avramovic repeated again on Wednesday, that it was necessary to decrease the costs of public services and a number of tax burdens. Unfortunately, he left the impression of trying to save his professional conscience. He did not manage to convey the idea that the state was prepared to do everything to save the dinar. Cigarette producers in Nis have stopped working because they are running into losses thanks to high tax rates. The dilemma over the reviving of the economy can really be summed up as the reviving of the state apparatus. Experts have a great many critical observations: if the authorities have agreed to the project of the new dinar only because they ran out of money, and because they were responsible for hyperinflation, then this situation will last a very short time. It will end with the state coffers being filled with foreign currency. When the money stops trickling in, it will only be a matter of time before the new dinar collapses.

Businessmen and experts in Avramovic's team have often repeated that to grant credit to producers is a threat to the dinar's fragile stability, all the more so, as this would imply the financing of redundant factories. In searching for an answer to question: is the state really prepared to protect the stability of the new dinar, all attention is now being focused on the new Serbian government and its determination not to bow down before the unreasonable demands made by those in power.