BELGRADE, Yugoslavia -- Yugoslavia devalued its dinar currency by 23.9 percent and ended price and import controls today in a move aimed at cutting its 170 percent inflation rate and introducing strict free-market economy rules.
The government also imposed a package of austerity measures as part of the sweeping economic reforms that should help in pulling the multinational country of 23 million people out of an economic crisis.
The reforms were worked out in accordance with demands by the International Monetary Fund, apparently in an attempt to speed up the signing of an agreement that would allow Yugoslavia to reprogram its $21 billion foreign debt.
The country needs about $400 million in additional funds from Western commercial banks to import the raw materials and various products needed to keep its home market well supplied and increase imports to earn Western 'hard' currency.
On May 16, the government imposed a decree limiting wages and salaries to cut down all forms of consumption.
The measures imposed Saturday lifted controls of about 60 percent of all prices and about 40 percent of imports. Under a new exchange rate one dollar buys 1,925 dinars and experts said the local currency is to continue sliding in its value towards the dollar depending on a daily situation in the Yugoslav bank's foreign exchange market.
By ending controls on prices, imports and the hard currency exchange market, the Yugoslav government fulfilled its part of the deal in an apparent effort to speed up the signing of the contract with the IMF. The signing of the one-year stand-by arrangement with the IMF will open the doors for reprogramming large portions of its foreign debt.
On Nov. 17, the government devalued the dinar by 24.6 percent, increased prices of essential goods and services and then imposed a six-month price freeze and salary control. But even under that regime of 'frozen prices' the inflation rate in the past six months has been 6 to 8 percent per month.
In the past six months, the value of the dinar has dropped by an average 90 percent against Western currencies.