Yugoslavia Seeks Shift to a ‘Market Economy’

The Yugoslav government has submitted a radical reform plan to Parliament and says it is close to obtaining a $490-million standby credit from the International Monetary Fund.

Extracts from the reform plans, presented to Parliament on Wednesday, were published by semiofficial newspapers Thursday. They are designed to turn Yugoslavia’s stagnating “self-management socialism” into a market economy with prices set freely. The profit motive would be introduced; bonds and shares would be launched, and bankrupt state firms would be sold off.

The reforms are the most radical change to Yugoslavia’s Socialist self-management economic system developed after Belgrade broke from the Soviet camp in 1948.

Yugoslavia is suffering an inflation rate of 149%, which has generated worker unrest. The government launched a strict austerity program this month involving wage and spending curbs and liberalization of prices, imports and currency. The program is a prelude to deeper reforms based on the government’s plans submitted on Wednesday.

A crisis conference of the Yugoslav Communist Party on Tuesday committed party leaders to a major economic reform to be completed by the year-end.

One of the most radical proposals is to base the economy on the profit motive for the first time, ending the practice of subsidizing and bailing out loss-making enterprises.

Tapping Yugoslavs’ Savings

The government plan foresees new forms of ownership to exist alongside social ownership. These include private, mixed and cooperative ownership. Mixed ownership will combine existing social ownership with one of the new forms.

The reforms propose a system of personal investment in the economy through bonds, shares and joint ventures in a bid to tap the billions of dollars held by Yugoslavs in hard currency savings at banks here and abroad.

The self-management system is built on “social ownership,” where society as a whole theoretically owns the means of production, a euphemism for state ownership.

Deputy Prime Minister Janez Zemljaric told Parliament on Thursday that the IMF had in principle approved the $490-million standby credit--linked to austerity policies and paving the way for rescheduling much of Yugoslavia’s $21-billion debt, Tanjug news agency reported.

Official sources said the IMF was expected to provide $260 million in the first tranche of the standby credit.

Paris Club Pact

Other talks with Western creditors aimed at securing a total of $1.4 billion in finance this year would be completed in the coming weeks, Zemljaric told Parliament.

He said commercial creditors had agreed to reschedule $7 billion of debts originally due to mature by 1996, of which $1.89 billion fell due in 1988. This agreement would be signed by the end of June.

Zemljaric said he expected an accord to be reached next week with members of the Paris Club of Western creditor countries.