The End of Avram

The Serbian government officially announced "adequate measures to stabilize supplies and prices to regulate the domestic market" on Tuesday. The government will start implementing those measures next week, deputy trade and tourism minister, Milos Dimitrijevic, said and added that the measures should prevent price hikes over a long period.

Without going into an evaluation of the measures before they're implemented one thing should be noted. The one thing that's been constant in similar efforts is the return of prices to some previous level.

This year began with a fierce campaign to get prices back to July 1994 levels; then that same campaign, slightly less fierce, was repeated after last March's monetary coup; the same demand was made when prices rose after a rise in customs duties and now there's an announcement that prices will be rolled back to some earlier level.

At the end of each campaign the public was told it was successful because it prevented a wave of price rises. At the same time, inflation is rising steadily at around 5% a month or 100% a year. That is what statistics say but it is clear that the real rise in prices is at least a little higher since street vendors sell things that can't be found in public sector stores, at prices higher than proscribed which are the cause of most shortages.

Current problems can be solved with a new, bold economic program which is aimed at the future, the public was told on Monday by National Bank Governor Dragoslav Avramovic in his first public appearance in a while. The governor said he had prepared the concept of economic policy measures. That is undoubtedly an admission that the policies of a stable Avram (the Dinar) have hit a wall, i.e. that the stable Dinar has been fiction for a long time and that there should be no mention of money in the real sense. The Dinar is a coupon rather than money since it isn't even the only legal tender in the Yugoslav economy.

Political and other analysts within the Serbian ruling party are now obliged to discover how and why the governor got to privatization as a necessity; something he confirmed in talks on Tuesday with a group of experts from Belgrade's Economics Institute including former members of his own expert team. It isn't logical for something as big and important as privatization in a state owned economy to shake a man who spent so many years dealing with economics. It hasn't even been a year since the governor told a closed door meeting at the Institute that the Yugoslav economy doesn't transition or privatization. Then in the autumn, president Milosevic told the governor and others how to draft an economic development program for the next two years. The governor then explained to the public that economic recovery and the stable Dinar were being undermined by a group of some 15 Belgrade journalists and economists. Later working groups were formed to develop the Milosevic program. Their work took about six months and it started with a statement from the Serbian president's wife (a member of one of the groups) who said she doesn't know much about the economy but knows how to get it in order.

Since the results of the working groups were adequate to the contributions of their prominent members which didn't mean good ideas and suggestions, the governor followed up the report on those results with a personal comment which differed in almost every point from the report. That's when the governor began dropping out of the public eye for long periods.

Probably there were reasons why Nebojsa Savic voiced a warning during the Institute meeting with the governor. He said taking care of the refugees did not require a re-balancing of any budget. No one said so but it's taken for granted that that step by the authorities would be a suing of the refugees to get cover money that has already been spent and declared as such in the quasi budget deficit (state debts to the central bank, debts and losses in the state sector) which amounts to billions of Dinars.

A good illustration of that kind of thinking came from Serbia's state TV last week which said there isn't enough bread in Belgrade because of the refugee wave. It seems that statement was such fierce backing to the regime that the Serbian trade minister had to state publicly that the shortage of bread should not be blamed on the refugees. But the bidding is on to estimate how much the refugees are going to cost Serbia and the FRY. There are no official estimates in public so we'll have to wait and see if the Serbian budget will now show some earnings since it no longer has anyone to support in Croatia. Two years ago, officials statements said aid to Serbs in Bosnia and Croatia stood at an annual 20% of the social product (close to two billion USD). Regardless of how high the aid really was, it was then quoted as part of the reason behind the economic catastrophe and the figure probably dropped in the past year of peace policies.

In short, stable is a bad situation as Miroljub Labus defined it - adding that one of the biggest problems now, non-liquidity, is the best illustration of the crisis in the state sector of the economy. As long as it exists there'll be a black hole and especially a daily danger that it could reach into the national bank and the money mint in Topcider.