Dinars for Repairing War Damages

The initial estimates by various chambers of commerce and the Committee for War Destruction report that in the two weeks since the beginning of the NATO bombing of Yugoslavia, Serbia and Montenegro have suffered direct damages in the amount of nearly one hundred billion dollars.  Damage has also been suffered by neighboring countries, but the final figures will only be known after the war ends.  They should also include the losses which came about through the fleeing by investors, not only from Yugoslavia, but from other countries in the region.  It is true that the famous saying "who risks - profits" continues to hold true on the investment market, but war represents too great a risk.  America and Great Britain have become convinced of this, having registered considerable jumps in investments, above all because of the fact that investment capital is fleeing from Southeastern Europe.  The result - the dollar and the pound are growing on a daily basis.

It appears unrealistic to talk about the strengthening of the dinar, and that is why it should not be a surprise that the Federal Government and the National Bank of Yugoslavia (NBY) are adopting new decrees every day which are directed at financial transaction during war conditions.  After the Decree on Financial Transactions With Outside Countries, whose objective was to bring all the foreign currency in the country into one place - the NBY treasury - the Federal Government decided that all cash payments by companies, and by stores which are not registered as legal entities, should be put under the control of the monetary system.  On the basis of complete documentation which legal entities are obliged to submit to the NBY Bureau for Settlements and Payments when making cash deposits, the Bureau has the right immediately to charge the war sales tax, which was instituted from day one of NATO bombing, from those companies which are not liquid.  The next in a line of priorities is the settlement of the obligations for the defense of the country and the repair of war damages, with the salaries of the employed being next in line.  This agrees completely with recent statements by Dusan Vlatkovic, NBY Governor, who stated that the priority of the central bank will be to repair damages, which slightly clashes with demands by syndicates that in conditions of war priority be given to taking care of those who were left without jobs through the destructions of war, as well as ensuring regular payment of salaries for those who are working.  It appears that the greater part of budget expenditures will be for such purposes, so that at the beginning of the week the Federation put into circulation two sets of bonds in the value of 200 million dinars in order to balance the budget and to make funds available for budget expenditures.

Economic patriotism, which only nine weeks ago sounded like a strange announcement, now appears hardly strange at all.  This is how the appeal by commercial banks to holders of checking accounts for settling their negative balances incurred before the beginning of the state of war should be interpreted, with warnings by those same banks that such credits should not be counted on in the future.  Namely, it's a fact that a great number of holders of checking accounts wrote many postdated check to cover war stores of food and other necessities, believing that the war will certainly result in inflation.

It is hard to say whether these obligations will ever be settled, but for now it can be stated with certainty that for now there is no reason for collecting stores.  State warehouses released high quantities of staple foods onto the market so that supplies are very steady.  The consumer rush has stopped, except for cigarettes which are released on the market infrequently, so that long ques in front of kiosks selling this article are to be expected.  At the time that this text was being written (Thursday), there were more cigarettes on the market than usual, which inspires hope that this segment of the market will be stabilized.

For now there are no indications that limitations will be introduced for purchasing staple foods, although that possibility should not be ruled out.  The press reported than in certain communities in Montenegro limitations have already been put in effect, and that citizens of certain communities are getting supplies on the basis of quotas which every community center allots for every household in its jurisdiction.  In Serbia, coupons have only been introduced for gasoline.  During the initial days that these papers were being distributed, people were seized by a veritable fever - ques in front of community centers were up to hundreds of meters long.  Now they are smaller, but citizens are reporting that in some community centers the distribution of coupons is sporadic.

Judging by events on the market, beside cigarettes, there is also a shortage of foreign currency.  Their sale has been suspended in banks, having been nonexistent even before the war, but the habit of citizens to exchange their extra dinars for foreign currency has been discontinued.  At the beginning of the week, the price of the German mark rose to 11 dinars, while dealers are unwilling to sell foreign currency.  Admittedly, they are complaining about the drop of interest in foreign currency, that is to say a shortage of dinars, so that at least in the short term, further jumps in the exchange rate should not be expected.