Yugoslavia tries to lower inflation


BELGRADE, Yugoslavia -- Yugoslavia Tuesday put into effect sweeping legislation intended to dampen the country's soaring inflation rate though selected wage and price controls.

The measures, approved during a secret session of the Cabinet on Monday and quickly enacted a few hours later by the country's parliament, establishes a complicatedwage policy, tightens banking and finance regulations, and permits the government to intervene in commodity markets to prevent monopoly pricing.


The government also implemented what is in effect a four-month price freeze on 42 percent of industrial production, including agriculture, and devalued the Yugoslav unit of currency, the dinar, by 9.5 percent during the weekend. The dinar fell from 371 to 409 to the U.S. dollar.

The economic measures were imposed on the eve of the 13th Communist Party congress, which begins Wednesday and is scheduled to last four days.

The congress, which meets every four years, is expected to concentrate heavily on the nation's economic problems.

A 59-page report by President Vidoje Zarkovic, which was released in advance of the session, does not spare criticism of the party for failing to implement economic development and even refers to mistakes committed in the 1970s, during the leadership of the late President Josep Broz Tito.


In his only reference to the United States, Zarkovic's report attacks the Reagan administration's decision to drop compliance with the SALT 2 strategic arms control treaty.

He called on the United States and the Soviet Union to 'pave the way to the revival of detente and come to some concrete arrangements to halt the arms race.'

The new economic measures comprised the first of three economic packages promised by new Prime Minister Branko Mikulic, a Tito aide who was elected to a four-year term in May, to pull the Balkan nation of 23 million out of economic chaos. Mikulic is best known in the West for managing the successful 1984 Winter Olympics in Sarajevo.

The second phase, expected to be implemented in July, will include further stabilization measures and the third phase, expected in September, will offer longer-term solutions.

'It looks like Mikulic has opened his offensive,' said one Western diplomat. 'He seems to have won a round last night. But the problem is what will happen at the republic level.'

Yugoslavia is composed of six republics and two provinces within a loose federation.

The nation's standard of living has dropped by about 45 percent in the past six years and it is straining with an unofficial inflation rate of more than 100 percent -- the official rate is 84 percent -- the highest in Europe. It has 1 million unemployed and is burdened with $20 billion in foreign debt to Western banks.


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