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April 27, 2001
. Vreme News Digest Agency No 488
Economic In (equalities)

Fish in Two Installments

by Dimitrije Boarov

I always bring to mind an inscription on a fish store in the market of Novi Sad: ‘Fish, in two installments’. For years I have been writing about the impoverishment of people in this country, and many times I have been going through the data that show the ‘display of poverty’, which had me convinced that the majority of people are somewhere ‘reaching the absolute bottom of the standard of living’ – but I always feel upset when I happen to see those symbols of poverty and wretchedness displayed around me, in reality. When it comes to the purchase of the Easter fish in installments – then it is not difficult to answer the question why this economy is troubled by recession. Apart from the food sector – there is no adequate demand, our economists would say.

Last week I journeyed to Slovenia and was almost stunned by the fact that practically everything can be bought on credit, for example, a new car, of a higher/medium class can be paid off in installments of 200 DEM a month (the salaries of better-informed journalists in Slovenia amount to between 5,000 and 15,000 DEM a month, while the average monthly salary in the country is about 1,100 DEM). It is natural that a citizen of the FRY becomes flabbergasted at the fact that something that is quite normal worldwide, ca also be found in the neighbourhood – there where the ‘separatist forces’ came out victorious. So, I too was invigorated by a ‘great idea’ – that the entire problem in Serbia can be resolved by initiating the consumption, that is by launching the possibility of credits, and that the new government should no longer prolong the restoration, or rather the privatisation of the banking sector.

Yet, it seems that something has cracked in the monetary sector, since the enthusiastic governor of the National Bank of Yugoslavia, Madman Dinky, who has almost been alone in presenting the reformist expectations of the entire nation last autumn, appears to have some difficulties in getting to the bottom of the main banking problem. It does not, of course, suggest that he is in any way irresolute, just as the arrival of only one foreign bank this spring (ready to offer credits to small-sized entrepreneurs) does not mean that other foreign banking giants are not interested in buying the Beogradska Banka or the Vojvodjanska Banka, for example. There are, however, many problems involved – and the main problem is the depth of the pit, into which the whole banking sector of Serbia has fallen during the Milosevic regime.

As it is already known a few months, the new leadership of the National Bank of Yugoslavia managed to run the first balance-sheet audit and determined that the overall bad debts of about a few hundreds of business banks were approximately 5.3 billion USD. That indicates that the Yugoslav banks have spent not only their own capital, but also caused the loss of others’ capital in the amount of 4 billion USD. That loss can partly be ‘rearranged’ by modifying our foreign debts towards the Paris and London clubs.

We found out a few days ago that Miroljub Labus, Vice-President of the Federal Government of Yugoslavia, had stated in London (where he took place at a session of the parliament of the European Bank for Development) that the debt rate of the FRY towards the gross national product (GNP) was 150% and that the aim of our country was to ask for two thirds (that is 67%) of the debt towards the Paris Club (which in its entirety amounts to 6.4 billion USD) to be written off (the Federal Minister of Finances, Pesic, however, mentioned that our debt towards the Paris Club was 4.6 USD – is it a Reuters error, or did Labus perhaps included in his calculation something more from the overall debt of 12.2 billion USD?). So, before the revitalisation of our banking sector, we should hope to obtain a considerable write-off of the Paris Club arrears, and then ask for a partial write-off of the sum we owe to the London Club (2.8 billion USD), and finally re-program the rest of our dues to other foreign countries and the World Bank.

Regardless of this whole story – the beginning of which is cited here only to indicate to the reader that it is not so easy to give away any big Yugoslav bank – I am not of the opinion that the rehabilitation of the real sector of our economy would necessarily ‘recover’ our banks as well. It is true that the aforementioned Slovenians avoided the sale of their banks to foreigners, and it is true that they still possess enough accumulation for crediting, but they are a different story. Yugoslavia, with a current annual export of about 2 billion USD cannot be placed in comparison with its former fellow SFRY republic, which turns 15 to 16 billion USD per annum. As one of my colleagues said, anyone can be as independent as he can afford it, so it means that Slovenians are at least eight times less independent than Serbs (though they do not show off about it). In fact – forty times, when we include the population ratio between the two former SFRY republics. Our case is somewhat more similar to that of Croatia – last year, of all foreign investors in Croatia (about 600 million USD), a share of 420 million USD was directed to the banking sector, so in the course of the last seven years, the foreigners have invested about 720 million USD in the stocks of Croatian banks. Half of that came from America and Germany. Croatia can also boast with a range of credits, but they have a great deal of assorted economic problems.

I’m writing all this because I started having the impression that the creators of the DOS (the Democratic Opposition of Serbia) economic strategy, are beginning to delude themselves that our country can be saved in a normal, slow but sure way, with the preservation of significant national resources and infra-structural corporations, and even the principal controllers of our national economy – the banks. Instead, they should keep in mind that there is no time for a normal way and that there is no recovery as long as fish is bought in two installments.

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