Package to Package

The Yugoslav National Bank (NBJ) is being asked not to take any step that would speed up inflation and stem non-liquidity and the cash shortage which is raising social tension and a wave of strikes.

This is just one of the attempts by the Serbian government to announce a new package of economic policy measures while expecting the main things to come from the NBJ. The things that are being announced as Serbian government measures is just a list of already compromised and outdated administrative and purely propaganda steps aimed at stopping price rises. The measures that really affect business conditions has been coming out of the NBJ for two years. Many NBJ measures were thought up in or approved by the Serbian government and they can be considered a Serbian package of economic policy measures. The problem is that the Serbian authorities are headed by a man who has been saying for almost 10 years that the economy has to have the burden of interest expenses lifted and who still thinks of monetary policy as an offensive weapon for development.

NBJ Governor Dragoslav Avramovic's expert group set up to reform the financial system urged a selective start to cleaning up banks. They urged moving the balance of payments to banks, raising the limit for founding banks to 10 million DEM, converting the foreign debt into shares, legal regulations for old foreign currency savings, systematic organizing of banks, free forming of agriculture prices, free trade and exports, buying up state surpluses at auctions and creating legal foundations for the setting up of non-banking financial organizations. Although the list seems radical, it does not include privatizing the economy and banks except in favor of foreign creditors.

The driving force behind the group, NBJ Governor Dragoslav Avramovic, began speaking of privatization amid the dramatic situation and it seemed he suddenly decided to initiate the findings of his working group.

When it comes to privatization in Serbia, everything is where it was when former Yugoslav Prime Minister Ante Markovic opened a secondary share market in 1990. So far, after five years that market has traded only the shares of two companies.

Instead of privatization, the Serbian government expanded an old regulation on the obligation of state companies to offer private companies the rental of facilities they're not using. That regulation was adopted only for Kosovo but has now been expanded to all of Serbia but no one knows the effect it has had or will have in future. Perhaps that step can be viewed ideologically as a step towards privatization but in fact it can only be viewed as a way to avoid privatization until the state recovers from the trade embargo. Possibly the state could recover after the sanctions are lifted but that has nothing to do with the inefficiency of the state economy.

But leaving aside speculation about what a political u-turn could bring in the context of private ownership over production facilities, try to assess the main contours of the new package of economic measures under the current rule of the game.

First, all the system institutions will be put to work towards stopping price rises at least at a level of around 30%. The Serbian government has approved 400 of the 600 applications it received for price rises of up to 30%. Economic Chamber vice president Milenko Ilic has promised his support to the government when he told Tanjug that without stable prices there are no stable business conditions. There are also some anti-monopoly measures; the name the government uses for price level policies. Then there are some tax policy measures aimed at getting more from the gray economy. And there are import restrictions through higher duties.

Desperately expecting a lifting of the sanctions, economic policy-makers are desperately trying to save the Serbian economy from ruin, but from the radical changes too and thus adopting new measures which lead nowhere.