A Failed Revaluation

by Zoran Jelicic

The first devaluation in the incomplete Yugoslavia, which took place last week, will primarily be remembered by the fact that it merited only a few short comments: newspapers stopped treating the issue only after a few days. The reason for this should not be sought in the obsession of people with the war, since the concern how to make it until the end of the month is becoming predominant

So, what can this lack of interest be attributed to? A dozen experts, theoreticians and practitioners, whose opinion VREME sought, were unanimous in their account of the devaluation of dinar: there will be only a few short-term benefits while the damage will be extensive. Although, it must be admitted, it would be silly to stick to the ridiculous exchange rate of DIN 13:DEM 1. In other words, we would be more justified to talk about the failed attempt of the monetary authorities to revaluate dinar, from the generally accepted black market exchange rate, to the present DIN 65:DEM 1.

Apart from this, the main benefit of this intervention is manifested through one of the main effects of any devaluation - through the increase of the price of imports. This occurs because businessmen are importing at a higher exchange rate than the official one - by increasing the republic budget incomes through the increase of duties. The customers, of course, will be the ones to bear the full cost of this adventure. The increased exports are unlikely to have much effect: partly because the price is not the most important competitive factor in the world market and partly because of the situation in the Yugoslav factories: for example, no price could ensure that the parts at the "Zastava" factory will be assembled or replaced, since the links with the previous trade partners have been broken.

And that would be all. Except if the authorities find the nerve to claim that the exchange rate of dinar means accommodating the needs of foreign currency savers. It is clear that the new exchange rate, which is half the street price, would suit primarily the ones who have had it "up to their ears". This gesture also adds cynicism to the act of devaluation.

There are, apart from these, both direct and indirect damages. The biggest of them all, could refer to the introduction of double exchange rates, and the experience of the socialist economy indicates that a multitude of exchange rates can be expected. The present Central Bank has for months been financing the cost of this or that government, rather than acting as a professionally responsible and independent monetary authority.

All things considered, the absence of the usual economic policy, which stems from the lack of state authority, can only result in the acceleration of the rate of inflation. Certain VREME sources claim that the rise of January prices will exceed 40 percent and this would mean the price annual price increase of between 15000 and 20000, although the economic system is likely to fail before that happens.

To brighten the overall gloom somewhat, we give you the story of the owner of "Yugoskandik" company who published an ad in the papers named "Let's boycott the mark". The mark, of course, is Genscher's and Kohl's, the very one which "Markovic imposed on us and which brought misery on our economy. We are the only country in the world which uses the mark as the monetary parameter". The conclusion goes as follows: "If our dinar has been buried by Genscher and Kohl, let us bury their mark, let it become worthless in Serbia and to all the Serbs in the world. Let's stop using German mark alltogether".

A case of Laza Pacua, the Treasury Minister in the government of the Serbian Kingdom before the World War II, springs to mind. Pacua was already in a refuge when the German creditors came to see him about the loans they gave to Serbia and were astonished to learn that the Serbian government has paid its debts on time. The German mark has, undoubtedly, become the most widely sought after currency in Yugoslavia. Its status is such that it is in a way crediting Germany, regarding the fact that the German monetary authorities do not need the cover for the German marks currently in circulation in Yugoslavia (according to certain estimates, we are dealing with the figure of between 3 and 5 billion DEM).

One thing is certain: as long as the solution to this problem is being sought in boycotting this or that currency, the sensible citizens of Yugoslavia will be converting their savings into the convertible currency. By doing this, they would, more accurately than any opinion poll, show what they think of the present government.