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BELGRADE - Inflation in Yugoslavia in September was 12.4 percent up on August, and the (national currency) dinar's agio rate and exchange rate on the parallel market against the German mark dropped sharply due to a chronic shortage of hard currency, on the one hand, and speculations in the exporters- importers-some banks triangle, on the other, according to the Yugoslav central bank governor on Friday.
Dusan Vlatkovic told a news conference in Belgrade that neither monetary policy nor the National Bank of Yugoslavia (central bank) were responsible for the September inflation, adding that the central bank had even reduced the money mass by 150 million dinars in September.
Vlatkovic noted that even if there had been a significant in-rush of dinars from the (Bosnian Serb) Republika Srpska, the Yugoslav republic of Serbia's U.N.-secured Kosovo-Metohija province or the other Yugoslav republic, Montenegro, it could not have affected the recent monetary and price disruptions to any marked extent.
Although the central bank is under constant pressure to print fresh money, the central monetary authority is determined not to increase the money mass by the end of the year or to relax its restrictive monetary policy, he insisted.
According to Vlatkovic, the money mass stands at 14.4 billion dinars (one U.S. dollar fetches just under 11 dinars).
This means that money for all the necessary financing, from autumn agricultural works to public spending, will have to come from rechannelling the existing banking funds and from the state's sources - taxes and tariffs, he specified.
The central bank takes the view that a policy of real interest rates - from the discount rate on Money One to the price of bank money - should continue even after the September hike of the retail prices, he said.
Stressing that the central bank would strive to curb the exchange rate of the dinar, which has slid by 85 percent on the gray marked since January, he said that the idea was to narrow the present wide gap between the official and the market exchange rates and bring them to a realistic level.
However, a devaluation of the dinar is not to be expected before the conditions are right, he said, explaining that this would necessitate changing the economic policy, consolidating foreign trade ties and establishing relations with international financial bodies.
He announced tighter control by the central bank and continued restrictive credit and monetary policy until the end of the year.
He stressed that, if this does not change the inflationary behaviour of individual commercial banks, the central bank will be forced to resort to the ultimate measure and stop the credit operation of the banks, which would cause problems for good operators, too.
Asked what would happen if Montenegro opted for the German mark as parallel legal tender in its territory or even for monetary independence, he said he did not believe it would come to this, adding he was confident the coming talks with the Montenegrin government would turn out well.
Should this happen anyway, consequences for the monetary system would be less severe than those in other areas, he said, adding that such changes would trigger significant changes in the existing monetary policy and the overall economic policy.