The Flying Piggy Bank

On November 25, shortly before last week's holiday, the president of the Belgrade banking group, Borka Vucic, said in Pozarevac that the population's savings could also be a significant source of hard currency, apart from foreign investments of course. Vucic explained that bankers kept urging the state to start paying off the “old” foreign currency savings, so that the confidence of the people in state banks would be restored. Although she said that peasants and other sections of the population had “as much money as you like”, but her bank raised only five million German marks for the power industry and the Jugopetrol enterprise. Vucic later opined that “bank counters simply forgot to do their work” in this operation called Energetika 98.

Borka Vucic, a close personal friend of Slobodan Milosevic himself, once again raised the issue of money kept by the population in their piggy banks, jars and hay beds. This issue always comes up big time when the state is in a tight spot, isolated from the world and desperate for fresh money. Her unrealistic optimism about personal savings reflects Serbia's and Yugoslavia's financial position. Once again, all hopes rest on the “magic piggy bank”.

THE OPERATION: In all honesty, it is very difficult to establish how much money people are keeping at home. One of the ways is to multiply the estimated private “foreign currency reserves” with about 2.9 million households in Yugoslavia. Some experts believe that an average Yugoslav household has saved a mere 200 German marks, meaning that the total sum amounts to some 580 million DM. Others believe that the sum is far bigger, not less than 1,000 German marks. If that's the case, the people have saved as much as 2.9 billion marks in their cookie jars. However, when you deduct the money made by various patriotic organizations such as the JUL managing board, the SPS main board, the SRS central board and the main boards of other political parties, the amount comes down to about two billion marks.

There are other ways of finding out the level of “unidentified” foreign currency savings kept by the Yugoslav population. Let's assume that the official state statistics are late and unrealistic, as a large proportion of the incoming foreign currency ends up on the black market. According to the latest 1991 census, some 215,000 of the 360,000 foreign-based Yugoslavs were employed. The amounts they send home to their relatives can be multiplied by 1,000 or 12,000 German marks, as you wish.
However, Vladimir Grecic of the Institute for International politics and economy says that there were 700,000 exiled Yugoslavs in Europe alone back in 1993. He believes that 420,000 of the were employed, sending home to their relatives an average sum of 2,500 US dollars per annum. If these calculations are right, the inflow of unidentified foreign currency into the country stands at 1.9 billion German marks, or about one billion US dollars.

Grecic is skeptical about official estimations that the foreign currency inflow stood at 40 million US dollars in 1994, 31 million in 1995 and 509 million in 1996. He believes that it stood at 150 million US dollars in 1996 and dropped to 120 million in 1997.

It turns out that exiled Yugoslavs have sent about 525 million US dollars or 945 million German marks to the country in the past seven hungry years. The theory that the country's foreign currency reserves stand at two billion German marks is acceptable only under the assumption that all this money ended up in piggy banks and cookie jars, although virtually everyone who had foreign currency all these years used it for some kind of financial transaction. Some people bought hard currency, others sold it, while banks stood by and watched the black market flourish.

However, it is unlikely that all this money had been saved, bearing in mind that the former Yugoslavia was far more efficient in persuading people to put their hard currency savings in the country's banks. The population had about 4.3 billion US dollars, or 7.7 billion German marks on their savings accounts when the former Yugoslavia's banking system collapsed in 1991. According to professor Ljubomir Madzar's calculations, Yugoslavia's foreign trade deficit in the 1991-1996 period stood at 11.5 billion dollars. Quite simply, it means that it has accumulated to about 15 billion dollars from the outbreak of the war in the former Yugoslavia to the present time. A part of that huge deficit was definitely covered by the money forced out of the people's piggy banks and cookie jars. Therefore, Borka Vucic's figures should be taken with some reserve, for this experienced banker is Milosevic's friend who always said less than she knew and spent most of her recent working years in Cyprus, stashing money on private Yugoslav accounts.
The mere attempt to estimate the amount of money being kept by the population is meaningless, regardless of whether the piggy banks are full of cash (which is hard to believe) or completely empty (which I am prepared to testify). From a macroeconomic point of view, it would be good if this money was put into more transparent circulation channels. Paying back the foreign currency savings to the population is not the only problem, for that alone can't lead to a full savings recovery even if the interest rates are very attractive.

The problem is that the banks will win back the people's confidence only when their confidence in the country's future is restored. However, that's another very complicated story, which is probably why Borka Vucic never mentioned it.