Bankrupt State

Serbia Faced with the Cost of the War

Devaluation of the dinar has already taken place, but the authorities are trying to conceal the last act of economic destruction. By claiming that there would be no devaluation, Serbian prime minister Mirko Marjanovic indirectly admitted that there are no more foreign currency reserves in the state cashbox

AIM Podgorica, 20 September, 1999 (By AIM correspondent from Belgrade)

Time has come for the Serbs to pay the bill for the lost war just three months after the end of the conflict with NATO. How much the dignity, heroism and patriotism cost has become evident in the past few days on the black foreign currency market - the already fragile dinar tumbled down headlong in reference to the German mark, just enough to show to the bold Serb war lords how grave the defeat is they had drawn their people into. The false dignity, therefore, has a price and it is mercilessly expressed through the value of the national currency, regardless of how hard Serbian power wielders tried to hide the enormous cost of the meaningless war waging. At this moment, the economic situation in the country is a bigger enemy to the Serbian regime than the weak and chronically divided opposition.

After the three-month war, the state cashbox is empty, the country is isolated and there is not a shred of hope that anybody in the world would invest into the regime that is ruined and indicted for war crimes. The first to confirm that state finances have collapsed was deputy prime minister of Serbian government who has resigned and leader of the Serb Radical Party Vojislav Seselj, proving in this way the thesis that the Socialists had entrusted him with the task to inform the citizens about all unpleasant facts. When the government of Serbia decided to compensate for its three-month debt to pensioners by giving them worthless papers in the form of coupons, without hesitation, Serselj admitted that this move was imposed by the fact that the state cashbox was empty and that the pensioners would be the first who would begin paying back the cost of the war.

Then came the turn of the teachers who were, just temporarily, in order to begin the school year, given half of something that is called their monthly wages. And then it was discovered that the state cannot even pay the soldiers and the reservists who had bled three months at the battlefield, nor the health workers, nor future mothers, nor children's allowances, not even its own administration. It was necessary for the printing works in Topcider (where money is issued) to start up the machines for a single shift only to cause chaos on the money market which was intensified by the money thrown out of Kosovo which Serbian regime still claims is a sovereign and integral part of Yugoslavia.

During the war and in the three-month postwar period, a fragile balance of money flows was established in Serbia based on low wages and controlled low prices of bread, milk, sugar, oil and electricity. The quantity of money in circulation at the time covered the minimum needs of the state and the population. Any disturbance of this balance, which was inevitable, according to the logic of economic rules, simply had to cause disorder and have a negative effect on the "health" of the national currency.

The spent and exhausted stocks of commodities and impossibility in the conditions of isolation and lack of money to organise any profitable production unavoidably led to the increase of prices of majority of goods necessary for life of the citizens. And then the notorious spiral of inflation started spinning in the game between prices and exchange rate, which cannot be stopped by any threats or appeals of state officials. Majority of economic experts believe that money issue and the arrival of a certain amount of dinars from Kosovo have caused the current inflation crisis in Serbia. Hardly anybody, however, points out to the possibility of a mini-monetary coup of the state. But this thesis should not be lightly rejected. If it is true that through the National Bank of Yugoslavia the state issued 400 million dinars, and there are brand new bank notes in circulation that confirm this leaving no space for doubt, the conclusion can be drawn that the intention was to buy with these dinars the money in foreign currency which is believed with good reason to be kept by the people at their homes.

The hysteria in the street foreign currency market which lasted for three or four days and the subsequent settling of the exchange rate could be signs that the state needs a certain amount of money in foreign currency either to pay something that has enetered the country through the channels of grey economy or to at least slightly fill up foreign currency reserves which have been meagre for a long time. If it is true, as assumed, that there are less than 130 million dollars in foreign currency reserves, this is a positive sign that Serbia, that is, Yugoslavia is bankrupt. The latest statement of Mirko Marjanovic, Serbian prime minister, also indicates that this is true, since he calmly admitted to the activists of a state trade union that the state must tolerate the enormous diproportion between the official and the black market exchange rate (which at times reaches the ratio 1:2). Marjanovic said on the occasion that there would be no devaluation, but not because the value of the national currency would become stable and be secured by foreign currency reserves, but because the state has no foreign currency reserves to defend the dinar after devaluation. This is just another confirmation that the state is bankrupt and that this is very skilfully concealed by phrases about "devaluation which will not be", allegedly in order to protect the people.

This very same prime minister of Serbia also admitted that the governemnt he is at the head of was not capable of paying back the debt to Hungary for transportation of the gas from Russia. The debt has grown and reached 20 million dollars, and having no other explanation Marjanovic accused Hungary as a member of NATO of having decided to spite Serbia by demanding to collect the debt. The value of a national currency has always been a reliable sign of either health or sickness of a national economy. And nowadays, everybody wants to get rid of dinars - the state, businessmen, farmers at the green market, ordinary citizens.

The trouble is, however, that foreign currency reserves will continue to drain off, and the only source for supplying them unfortunately will not be export of domestic goods because there is no such thing, but remittances from relatives who live in Germany, Austria, France or Switzerland. These sums are not big and they will just help some families in Serbia to survive for some time, but they will not help the state to pull itself out from the foreign currency disbalance. There is some truth in speculations that the economic situation gives a bigger headache to Yugoslav president Slobodan Milosevic more than the opposition which is demanding his removal from office. That is why he is in a hurry, regardless of how absurd and ridiculous it may be, to publicly brag every day that he has reconstructed some destroyed houses, repaired waterworks or a transmission line, or employed a few workers in factories which have restarted work. In this way, on the one hand, he believes that he may win back the favour of majority of the population, but on the other hand, he is sinking deeper into financial problems which will inevitably lead to super-inflation.

For "reconstruction and development" as the ruling Socialists see it, a lot of real, not false money is needed. Buying social peace and the illusion of "reconstrction and development" will cost dearly the citizens of Serbia. This is a dangerous adventure of the regime, one might even say the last card it has played in order to remain in power. Destructoion of the economic system of Serbia is in the final phase, but it is also an opportunity for somebody to make a profit from it. Stubborn refusal to devaluate the dinar helps only privileged companies whose directors or owners are men from the ruling party and state establishment. They are the only ones who can and dare knock at the door of the governor of National Bank of Yugoslavia, who is by the way a member of the leadership of Yugoslav United Left, and ask to buy foreign currency at the official exchange rate of 6 dinars for 1 German mark. Perhaps none of these men will ever do it, but it is enough that they have the possibility to resell German marks bought in this way immediately in the street at the black exchange rate of 13 dinars for 1 mark, or through transfer accounts at 18 dinars for 1 mark. It is needless to say whose pockets the profit made in this way goes into and then further multiplies if the foreign currency cheaply purchased from the National Bank of Yugoslavia is used for imported smuggling goods, say, petrol or drugs.

Devaluation has in fact already taken place in Serbia, and this is felt by everyone who enters a store or goes to the green market. The authorities can do nothing but either pass over this fact in silence trying to convince the people that they are still living in a happy country, or keep accusing the new world order and its local servants - the democratic opposition, for "our new economic troubles".

Misa Brkic

(AIM)