YUGOSLAVIA-ECONOMY: Bye Bye ‘Grandfather’, Hello Hyperinflation?

By Vesna Peric Zimonjic Reprint | | Print |

Vesna Peric-Zimonjic

BELGRADE, May 16 1996 (IPS) - Dragoslav Avramovic has been hailed by supporters as a saviour who, during his tenure at the Yugoslav Central Bank, mounted the tiger of hyperinflation and brought it under control.

On Wednesday night, the man known as ‘Grandfather Avram’ had no answer to the political force of Slobadan Milosevic: the president of Serbia lined up deputies to sack the Governor and remove the threat of deeper economic reforms.

Inside the chamber, opponents poured villification and scorn onto Avramovic’s head. Outside a group of workers put on a display of solidarity. Then 75 out of 108 members of the Chamber of Citizens (Lower House) of the federal parliament of rump Yugoslavia ended two days of intense debate by voting decisively.

There were only 33 votes in favour of keeping Avramovic: the socialisat party of Milosevic had had its way. Montenegrin socialists, who earlier supported Avramovic’s policies, voted against him as well.

“Grandfather Avram” had angered the ruling socialists by pressing ahead with an economic reform programme seen as too radical. They were particularly peeved at his insistence on re- integrating federal Yugoslavia into the international monetary system — on terms seen as onerous.

Addressing parliament on Tuesday and Wwednesday, the governor accused the federal government of obstructing the readmission of Yugoslavia into the IMF and leading the nation to ruin. “The only way to save the economy is to obtain foreign credits,” he said. “This government has still not decided to side with the west or with North Korea and Angola.”

Longstanding disagreements spewed into the open last March and April when the governor was publicly attacked for his refusal to print money and finance the spring sowing season.

And as Yugoslavia’s key negotiator with the International Monetary Fund (IMF), Avramovic had suggested the country accept restructuring proposals with which the federal government felt uneasy. Ruling socialists were also angered by a plan developed by the so-called expert group, headed by Avramovic, that proposed swift privatisation.

Observers noted that the fate of Avramovic and the privatisation model chosen could be crucial for Yugoslav economic and political future.

Confirmation of the lower house vote is required in the upper house of the Federal Parliament, Chamber of Republics (Serbia and Montenegro). That body is packed with MPs of ruling socialists in both republics comprising rump Yugoslavia: a vote is regarded as mere formality.

A retired World Bank official, Avramovic is author of the plan that curbed hyperinflation in the country in January 1994. But he had frequent conflicts with the ruling socialists. A similar action was taken by parliament against former federal prime minister Milan Panic, reform-minded Yugoslav-born American businessman, in December 1993.

Earlier, the government had blocked Avramovic’s attempt to return the country to the IMF in May and gain access to credits seen as necessary to rebuild an economy weakened by the impact of sanctions imposed because of its support for the war in Bosnia- Hercegovina.

Efforts to restart the economy in rump yugoslavia since sanctions were suspended last november have foundered. Most Yugoslav companies and banks are bankrupt. Industry has not turned a wheel for almost four years. Living standards in what was once a buoyant economy have plummeted.

Bosses of most state companies are appointees of the socialist party or the Marxist United Yugoslav Left (JUL) party, headed by Milosevic’s wife, Mirjana Markovic. A dozen of the most important managers double up as ministers in the Serbian government.

Socialist hardliners believe their hold on power can be consolidated by pursuing closer links with China and North Korea rather than forging a compromise with demands by the west and international financial bodies for more democracy and an open economic system, observers say.

The governor himself was not willing to comment the removal Wednesday evening. “I have no comment” he told reporters in the parliament hall. “That’s life. Another battle lost” he added. His disappointment was obvious.

During the two days of debate, the governor attempted to explain the possibilities of further economic development for Yugoslavia if it joined multilateral lending agencies. He called the policies of the Federal government “idiotic, backward, doomed to push people back for decades”.

Rump yugoslavia witnessed hyperinflation in 1993 that pushed up prices and made the local currency, the dinar, almost useless. Avramovic’s reform in January 1994 brought this under control and gave him enormous popularity.

Its decision to defer renewal of its IMF membership until the end of the year was “suicidal”, Avramovic said.

Serbian Opposition parties believe the ruling socialists practically do not want any economic changes, let alone international finance “meddling in government’s business”. This would uncover some of the dirty schemes that deprived the country of its economic basis during the three and half years of sanctions.

Opposition politiciansa claim about four billion us dollars were spirited awauy from private bank accounts since 1990, through officially sanctioned pyramid schemes, forced exchange of hard currency at artificially low rates during hyperinflation and clandestine operations that involved transfer of funds abroad.

For their part, ruling socialists accused Avramovic of “trying to monopolise negotiations with the IMF” and of “irregularities” in his work. Finance minister Jovan Zebic told the federal parliament the government’s measures were not being implemented. “Avramovic implements only those which he wants. That is no longer tenable.”

Immediately after the session, Vuk Draskovic, leader of SPO, told reporters that those who voted against the governor “voted against Serbia, against life, their own children and their future”. And Moderate democratic party leader Zoran Djindjic said the decision was expected, “but anyway shocking”.

No successor to avramovic was named so far.

The hard currency black market reacted immediately after the news of removal of the governor. The dinar, which had been stable at 3.3 to the german mark, fell to 3.45.