Serbia's inflation 'beyond calculation' Life savings gone

fruit sells by piece

July 30, 1993|By Dusko Doder | Dusko Doder,Contributing Writer

BELGRADE, Yugoslavia -- Serbia is rapidly approaching a Weimar Republic-style hyper-inflation and chaos.

A week ago, the annual inflation rate was calculated by Western specialists at more than 1.5 billion percent. The Yugoslav dinar had been reduced to 0.0000007 of its value against the U.S. dollar in 1990 -- 13.6 million to the dollar now compared with 10 to the dollar then.

"We are in new territory," says a senior Western diplomat here. "This thing has gone beyond calculation."

As in Germany in the 1920s, the effect has been devastating. Life savings have been wiped out. Prices are soaring. The average monthly salary is less than $6, or the price of 30 loaves of bread. A bottle of the cheapest local white wine costs $2. One pound of chicken is $2.40. Distraught shoppers buy fruit and vegetables by the piece.

And the prices keep rising. A small meal for two at McDonald's last Saturday cost 50.5 million dinars; Tuesday the same meal TC was 66 million.

The Yugoslavian government issued last week a new 50 million dinar note (worth about $3.70). It and the 5 million dinar denomination are the principal notes in circulation.

The problem is that shops and kiosks are unable to give customers any change; many people either have to forgo their daily newspaper, which costs 2 million dinars, or buy something else to bring the total to 5 million.

The new Yugoslavia is subjected to stringent United Nations sanctions because of its role in the Bosnian war. This means that any stabilization measures are out of the question as long as the sanctions are in force. Among other things, the sanctions are likely to restrict Belgrade's capacity to print more money because of the lack of high-quality paper.

Locally made paper, however, could be used for printing bonds.

The Yugoslavian government floated last week the idea of new "convertible bonds" to pay farmers for wheat.

This would be a first step toward a coupon system backed by commodities. Like the farmers, the producers of other commodities would be given coupons that they could exchange.

"The appearance of bonds as some form of a bridge between [the present and future dinar] is inevitable," says a prominent economic specialist. The ultimate result is a barter economy.

At the moment, the deutsche mark is the unofficial currency here. But since few people have access to hard currency, the number of those slumping into abject poverty is visibly increasing. The number of beggars on Belgrade streets is growing. Most people already are putting enormous amounts of energy into acquiring food reserves to survive the winter.

This week, the government also decreed a practical change in the pricing system. As of Sunday, all prices will have the three last zeros wiped out. This will make things easier in stores. There are no cash registers that can handle ordinary shopping, since the totals frequently run into hundreds of millions of dinars.

There are also signs of coming social unrest. Farmers have tied up traffic in much of Serbia protesting government policies. Trade unions are talking about a general strike. To keep the country's economy afloat, the government may eventually resort coercion and repression, which it has so far not used in economic spheres.

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