Yugoslavia devalues dinar in effort to jump-start economy


BELGRADE, Yugoslavia -- Yugoslavia devalued the dinar by more than 30 percent as part of an effort to revitalize the crisis-torn country's moribund economy and salvage his program of Western-style economic and political reforms.

It was the second time this year that Prime Minister Ante Markovic was forced to slash the value of the Yugoslav currency, raising the exchange rate from 9 dinars to one German mark to 13 dinars to one German mark.


Under a formula employed by the International Monetary Fund, the change represented a devaluation of 30.77 percent.

Markovic announced the change in a speech to a joint session of the federal Parliament in which he made a renewed plea for approval of basic reforms designed to transform Yugoslavia from 45 years of Communist rule into a free-market democracy that can be integrated with Western Europe.

What the prime minister calls his '11-plus-three' plan is aimed at restoring economic stability and discipline until the six republics resolve a bitter dispute over the future of the multi-ethnic federation that could push it into a civil war.

The plan has been endorsed by the IMF, other international financial institutions, the United States and Western Europe, but rejected by the individual republics.


'The implementation of the reforms is the only way which can extract us from the crisis,' he said in his 90-minute nationally televised address. 'We simply do not have any other choice.'

The plan is to be debated by lawmakers next week.

Opposition by the republics to the reforms, which began in January 1990, has halted the process, leaving Yugoslavia facing an economic catastrophe that would further enflame tensions produced by the political and ethnic tensions.

While some reforms have been accepted, such as the holding last year of multi-party assembly polls in therepublics and making the dinar the first convertible currency in Eastern Europe, other provisions have been spurned, including an end to political control of state enterprises, the basic key to power in Yugoslavia.

In addition, the leaders of Communist-ruled Serbia and the nationalist regimes in Croatia and Slovenia have ignored spending and salary freezes, erected internal tarrifs that have reduced domestic trade and continued to support overstaffed, inefficient and unprofitable enterprises.

Croatia and Slovenia, which are seeking independence, and Serbia, which wants to preserve socialism, have rejected Markovic's plans to reform and centralize the debt-ridden banking and taxation systems and withheld contributions to the federal budget. Croatia and Serbia also have diverted into their own accounts huge amounts of federal funds.


Markovic lashed out at the regimes of the three republics, accusing them of pushing Yugoslavia backwards towards totalitarianism.

'There is a danger of new etatism in our country and in action is an attempt to ... create a new economic basis for totalitarian power and disable the transition into a society of citizens,' he said.

The republics had exceeded salary limits by $5.4 billion since last June, severely straining the country's precious foreign currency reserves and threatening the convertibility of the dinar, Markovic said.

He said devaluing the dinar was needed to restore a financial equilibrium and permit his reforms to go forward. The republics, facing severe cash shortages because of their financial mismanagement, have been clamoring for devaluation to boost exports and stimulate sagging industrial production.

'The rate is being taken into the required parity with salaries. Second, with this adaptation, the limits of public expenditures fixed by law remain within a stabilization framework,' Markovic said. 'Third, it stimulates exports and creates conditions for insuring the balance of payments.'

He also accused the republics, particularly Serbia in its 'repressive' policy towards the ethnic Albanian majority of its province of Kosovo, of violating human rights through the fanning of nationalist passions in order to preserve their power.


'The real situation of human rights has been deteriorating,' he said. 'There are frequent instances of discrimination on national, ethnic and political bases.'

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