ON THE THRESHOLD OF SURVIVAL

Serbian Economic Circumstances

ON THE THRESHOLD OF SURVIVAL While election competition for the Serbian parliament is approaching its full swing, the "sand clock" in domestic economy is irrevocably measuring time which is leading the Serbian economy straight into cataclism. It remains to be seen whether the social threshold of survival of the population will be crossed before or after the elections. In any case, whoever comes to power will have to pass between Scylla and Charybdis. Serbia is going headlong towards Albanian circumstances when radical resolution of political economic and social circumstances will be taken over by the street, with all the consequences which such an outcome implies.

AIM Belgrade, 3 April, 1997

The existing regime is trying to leave the impression that something is being done on improvement of economic circumstances, but there are no visible effects, because economic conditions are in fact getting even worse. Statistics is proudly registering that monthly increase of prices in March amounts only to one per cent, but "forgets" to mention that the income of the population has drastically dropped. The pensioners have received by 12.8 per cent lower pensions, in fact only half of it, and the employed receive their salaries with a delay of a few months. Even the federal administration receives just half a salary a month, so that if this trend continues they will receive eight salaries this year, the same as pensioners.

The income of the population, in comparison with those in former SFRY, is several times lower, but the prices have increased manyfold, so that the total purchasing power of the citizens is drastically reduced and they have been brought to the verge of survival. Majority survive thanks to savings, but on the basis of the sale reduction in shops it can be concluded that these reserves are almost exhausted, because consumption is reduced to purchasing only most essential food. That is why classical trade does not exist in Serbia any more. The well-known chain of 'Beograd' department stores is facing bunkruptcy, and the employees have forgotten when they were paid last. The biggest department store in Belgrade is closed since last autumn and it is almost certain that it will be sold in order to settle debts.

Financial exhaustion is also present in banks. Several of them have stopped working because the central bank had deprived of them of permits, but quite a few other fear similar destiny. The list of banks whose cheques are not received in stores any more is quite long. Shortage of money has acquired proportions of an epidemic because there is practically no production. Enterprises have no capital with which they could move the machines in factories from a standstill so that the little money there is mostly circles around outdoor street trade. Former "flee-markets" with cheap low-quality goods have been transformed into main trading places with pretentious names of shopping centres.

Domestic banks had once invested large sums of money into the economy, but when time came for credits to be paid back they were left empty-handed, because the factories could not meet their financial obligations. That is why credits became more expensive, and their interest is nowadays reaching the fantastic 15 per cent. Despite loan shark interests, demand for money is higher than the offer, and the reason for that is that there is no fear of bankrupcy among the debtors. The judiciary have more understanding for the debtors than for creditors, so it is very risky to lend money to someone. Citizens do not trust the banks, so there are very few who nowadays leave their money in them. Owners of foreign currency are especially cautious because the banks, at a sign from the regime, had spent all the former foreign currency savings and caused over 8 billion dollars' worth of damage to the citizens.

Large number of them suffered damage from having left money in privately-owned banks which collected enormous money by promising high interest rates, but this "chain of fortune" was broken when the citizens started to demand their money back. Although many have lost tens thousand German marks, the regime managed to neutralize their discontent, while in Albania the population went out into the streets even for 100 dollars they had lost. Nothing of the kind happened in Serbia, because the money they had lost in banks was not the last they had, contrary to inhabitants of Albania, so in that fact reasons for preserved peace in Serbia should be sought, although owners of these foreign currency savings accounts are still trying to get hold of their money, and even started to seek reception by Milosevic himself, although he is showing absolutely no intention to receive them and listen to their demands. The President of Serbia had never had understanding for this kind of protest, until discontent reaches proportions which can endanger his power.

In such economic circumstances, the Serbian Government offered the text of draft law on privatization. The first comments are very unfavourable, because the Government did not get rid of former ideological prejudice and love for its social ownership. The key weakness of the offered solutions is that the Government in the procedure of privatization relies primarily on domestic sources, believing that the impoverished citizens might appear as buyers. However, they can become owners only if a part of the property they had created by work is given to them as a present, as proposed by some esteemed economists, while the remainder should be offered to foreign buyers. Although Serbia is forced to hasten the process of privatizaion to a maximum due to the hopelessly difficult economic situation, the offered draft makes the impression that the Government is in no hurry, although it counts on sources of money where there is none. Perhaps it is forced to do it by the fact that foreign buyers do not manifest interest the Government had counted on. Their disinteredness is understandable, however, because a real reliable mechanism which would guarantee respect of contracted obligations has not been created yet.

Probably even the regime itself wishes to have loose legal security, because on the contrary the state would also have to be sold for debt. The state owes only the pensioners five billion dinars, and in order to pay all the remaining debts it would have to engage 67 per cent of the annual social product for the purpose, and this is an unbearable expenditure for the poor Serbian economy.

Borka Vucic, manager of Beobanka, the biggest bank in Serbia, contrary to the predominant conviction that the only way out is in engagement of foreign capital, which Yugoslavia does not meet the conditions for doing because it has no access to international financial institutions due to the known outer wall of sanctions, believes that the population still has reserves which can be activated in revival of the economy, and that efforts should be turned towards collection of foreign debts primarily from Russia, Iraq and Syria. Although these are large sums of foreign currency assets which, only from Iraq, amount to over 2 billion dollars, one can hardly rely on them, like on the domestic ones, because the effects would be the same as that of saying good morning to a deaf person.

That is the reason why the forthcoming period is announced with a large dose of uneasiness, which is founded in the fact that the existing regime is not investing sufficient effort and skill to find a way out of political isolation, and domestic economy has no power to support such policy. That is why there is fear in the public that the road to changes in policy leads via previous economic collapse of the country, in other words something similar as in Yugoslav neighbourhood - Albania and Bulgaria, where the population is facing hunger. Two facts sufficiently illustrate that such predictions are not pessimistic exaggerations. First, Yugoslavia is facing the need to import wheat, although it has potentials to produce surpluses, and second, its foreign currency deficit has increased so much that the day is approaching when its capability to make payments abroad will be questioned.

Ratomir Petkovic