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Serbia: Countdown To Bankruptcy?

By Zoran Jelicic

Belgrade, 25 March 1997 (RFE/RL) -- There's a growing contrast in Belgrade these days between the optimistic official expectations of economic stability and growth, and the dire forecasts of independent experts.

Serbian President Slobodan Milosevic in his latest comments on the economy again painted a rosy picture, saying that conditions are becoming increasingly favourable for successful reforms.

Milosevic said that reform process already started is taking place against a background of "both industrial and agricultural production growth," as well as "a realistic financing of public spending."

However, an RFE/RL correspondent in Belgrade says many economists view the Serbian economy as being one step from breakdown.

Our correspondent quotes Dr. Jovan Rankovic, a professor at the University's Faculty of Economics in Belgrade, as saying that the state is technically approaching bankruptcy. He says that's being postponed only because of the pensions and personal money transfers coming into Serbia from abroad, to the extent of some $180 million annually.

But the professor says such a thread cannot for long keep the overall economy afloat. He estimates the deficit has risen in the last year from about $900 million to $2.5 billion -- the net result being, he says, that Serbia is now spending what previous generations have created.

The economic slide has worsened during the months when the Milosevic government's attention was almost wholly preoccupied by the daily opposition protests in support of demands for reinstatement of municipal electoral victories in Belgrade and other cities.

Now the opposition has won its point, but critics say the president is still refusing to acknowledge the economic realities facing the state, or at any rate to admit the gravity of the situation in public.

One of the governemnt's big problems is the decline in revenues, which is accentuated by the flight of more and more businessmen out of the "daylight" economy into the black economy, in an effort to avoid excessive taxation and declines in profits.

The government's debt to public sector workers is increasing relentlessly, and there's little trace of Milosevic's "realistic financing of public spending," if that means taking steps to meet obligations while living within budget constraints. Inflationary tendencies are increasing.

Our correspondent reports that the reform process trumpted by Milosevic has in fact avoided tackling any of the real areas where restructuring is unavoidable: principally in abandoning state ownership of the overall national economy. The government has almost completely revoked the privatization process and intoduced an unprecedented monopoly in all the sectors of the national economy. The agricultural sector too in fact is in retreat, with farmers switching to susbsistence methods in order to cope with present conditions.

When or if real reform begins, it will be a more painful and difficult process than if it had been carried through decisively in previous years.

Zoran Jelicic is a Belgrade-based journalist who regularly contributes to RFE/RL's South Slavic Service.