Hungary plans to go 'convertible' for Western trade
Imagine, a convertible currency behind the Iron Curtain! That's exactly what the Hungarian money -- the forint -- is going to be possibly later this year, it has been learned here.
Hungary's seemingly booming economy, increasingly intermingled with the fortunes of Western European and North American trading partners, simply requires a less cumbersome system than the present way of doing business.
"We are going to achieve full convertibility of the forint of facilitate our dealings with the capitalist countries," a leading state planner said in an exclusive interview.
He has implied that a convertible Hungarian currency will meet all the international obligations, including gold and foreign-exchange reserves, and a greater scrutiny of the local economy by outsiders stemming from its new status.
Dr. Joseph Pelyva, a senior economist with the Hungarian Ministry of Foreign Trade, said the "occasion will mark the maturing of our international position" in world commerce.
The step about to be taken has been contemplated for several years by the Hungarians. It is due now because of an intensified drive to boost the country's business with the West.
Hungary conducts slightly more than half of its foreign trade within the Eastern bloc. Its total external trade is worth about $10 billion (US).
The new and more flexible economic plan also allows selected Hungarian enterprises to "do their own thing" abroad.
The economic directives actually emphasize the profit motive. Moreover, Hungarian businessmen, still state-controlled but steadily more independent and aggressive, are making more forays to the West. This has combined to clinch the case for convertibility of the forint.
There is likely to be a sharp jump in the conversion rate, now at 31 forints to the dollar, to please foreign tourists here and to strike a less arbitrary and more rational value for the local currency.
Hungary's economy, though firmly enmeshed within the Eastern equivalent of the European Common Market, the Soviet-dominated Comecon, has become the most open and, perhaps, the most successful in the bloc.
Whatever, Hungary has not all of a sudden stumbled on a Shangri-La. Though now enjoying the benefits of Western economic contacts, the country can no longer be immune to the vagaries of the international market- place, either.
Higher energy costs, fluctuating returns on the export of its agricultural and manufactured products, and even losses incurred on certain pursuits must be faced "daily and squarely," another official said.
Hungarians have been buying Western technology under licences for some time. This transplanted technology is turning out to be a mixed bag of only moderate successes and some very costly failures.
As a senior planner lamented, "Frequently, we lack the infrastructure" -- the basic installations and facilities, such as communications, roads, educational institutions, etc. -- to accommodate Western expertise fully and to make the best use of it.
Some of the acquisitions have been haphazard at best, with virtually no material gains derived, because they could not be "plugged" into the Hungarian economic system. Sometimes the technology had already become obsolete.
State planners acknowledged that low productivity remains the biggest curse of the economy, which makes efforts at modernization, for example, less fruitful.
But the Hungarian worker is not about to be offered extra material incentives. On the contrary. Planners said, "We will be doing well be holding the standard of living at the present level in the next two years." They recognized the harmful presence of double- digit inflation, once regarded as the exclusive scourge of the capitalist West.
The candid comment in fact is an admission that Hungary and its 10 million people can expect an actual decline in gross national product and personal incomes.