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ECONOMY: Milosevic Fiddles While Serbian Economy Burns

Vesna Peric-Zimonjic

BELGRADE, Jan 29 1998 (IPS) - The increasing economic squeeze on Serbia is driving striking workers onto the streets in protest, paralysing public services. Hundreds of thousands of public sector staff want to be paid on time, but the state lacks the cash to guarantee this.

This week health workers and schoolteachers announced planned strikes that could bring health services to a standstill and close the country’s schools. Last week a six day strike shut down Belgrade’s public transport. Serbia’s 1.5 million pensioners only got the first half of the November pensions on Jan. 20.

The crisis has many causes, but most analysts focus on to Belgrade’s refusal to meet the terms set by the west for the eventual lifting of sanctions. The sanctions were applied on federal Yugoslavia (Serbia and Montenegro) in punishment for Belgrade’s part in fomenting the war in neighbouring Bosnia- Hercegovina.

“Federal Yugoslavia is and will be deprived of foreign aid and access to international financial institutions as long as it fails to fulfill conditions imposed for its reintegration into the world community,” says Jovan Rankovic, a professor of economics at Belgrade University. “If it does not accept these conditions, the country will be left on the brink of economic disaster.”

The conditions include democratic reforms, an agreement over the mainly Albanian populated Serb province of Kosovo province and full cooperation with the U.N. war crimes tribunal in The Hague. With these conditions unmet, it is the poor, very old and very young who are suffering hardest.

Yugoslav president Slobodan Milosevic announced an economic programme aimed at 10 percent growth in 1998 in December. Yet state controlled media have been unable to come up with the background figures and on TV reduced reports of renewed sanctions to a single sentence each. Agricultural growth in 1997 was only six percent and only three percent growth is expected in 1998, agriculture minister Nedeljko Sipovac said last week.

In the meantime, in early December the United States decided to maintain the so-called ‘outer wall’ of sanctions, denying Yugoslavia access to international finance for another year. Foreign funds are seen as vital to help it reform and catch up with other transition economies. And at the end of December the European Union said it would not grant trade privileges to Yugoslavia in 1998 because it has not met human rights and other conditions.

“Politicians seem to think the price of isolation is lower than the one of meeting the conditions,” says Slobodan Milosavljevic, chief research economist with the IZIT Institute for Market Research. “But they are wrong and unrealistic”.

According to Mihail Arandarenko of the Group 17 of independent economists in Belgrade while the official unemployment rate is officially 26 percent the real figure is closer to 50 percent. The average monthly salary, when paid, is around 150 dollars.

Even Milo Djukanovic, the new reform-minded president of Montenegro, recently told Belgrade based independent Radio Index that Milosevic’s statements on reform, privatisation and opening of the economy were just “empty words” and “pure declarations”.

And according to well informed sources and the independent Belgrade daily Nasa Borba, Milosevic ignored a U.S. Treasury Department study on Yugoslavia’s economic crisis by U.S. envoy Richard Gelbard, in Belgrade to review the Kosovo situation. The U.S. Treasury described the situation as “terrible”.

Belgrade sold 49 percent of Serbian Telekom to the Italian STET and Greek OTE telecoms giants for more than 1.2 billion dollars last June. So far, the government has spent one-third of this to pay outstanding salaries and pensions, which are regularly delayed by two to three months.

It has also said it will sell off parts of two reasonably healthy enterprises, the national power network (EPS) and the national oil company (NIS). Analysts dismissed the plans as short-term. The independent weekly Ekonomska Politika said the economy was going down in 1998 regardless and that sale of state enterprises will only affect the “rhythm” of that decline.

“It is doubtful how much time the regime could buy by selling the two (EPS and NIS)” says Bojana Jager, one of the top economic journalists in Belgrade. “The family silver can be sold only once and it will only serve for small time-buying of social peace.”

With a gross national product of 16 billion dollars in 1997 and annual income of 1,520 dollars per citizen, Yugoslavia, with its 10.6 million population, ranks 41st among European countries says Ekonomska Politika said. Only Albania, Bosnia-Hercegovina, Bulgaria, Macedonia, Moldova and Romania are behind Yugoslavia.

Yugoslav foreign currency reserves total less than 200 million dollars, according to a Western bank source, equal to less than a month’s worth of the national trade deficit, measured on Jan. 16 as 2.4 billion dollars in 1997. Yugoslavia owes China and Russia 300 million dollars in petrol and gas imports alone.

Yugoslavia doesn’t even have the foreign exchange reserves to hold its currency at any price against the dollar or German mark, despite reported plans to devalue the currency by half from its present 3.3 dinars to the mark.

The dinar was last devalued in November 1995 but held stable against the black market rates until last November Serbia hiked petrol prices by 37 percent, triggering a new dinar decline.

Milosevic’s talk of a 300 million dollar trade deal with China during a December trip to Beijing has failed to generate a single shipment of goods so far, informed sources say. Banking sources in Belgrade confirm that no bank in China will open a credit line for any Yugoslav firm, no matter what deals were made during Milosevic’s visit to China.

Despite all this the Belgrade government has set itself the goal of reaching, by 2005, the level of development that Serbia had seven years ago, just before the breakup of the old Yugoslav federation.

Yet even this humiliating target may be beyond its reach without radical change. According to the Institute of Economic Sciences in Belgrade, even if a proposed two billion dollars in new capital is raised each year, in ten years’ time Yugoslavia will still be poorer than it was ten years ago — when Milosevic came to power.

 
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