Blueprint for cutting debt, trade deficit
Poland's impact on Yugoslavia's credit rating. This seems to be a subject that is always mentioned by foreign banks in discussions with Yugoslavia - with the obligatory addition that the situation in Poland is quite different. And there is no comparison on the subject of foreign borrowing and indebtedness. But major risks incurred through lending to Poland, of course, have burdened the reserves, and that's the reason they always mention the subject. However, in practical terms, so far I know of no cases where a bank has refused to lend to Yugoslavia, when we have turned to it, by invoking Poland.
Foreign debt. We do have a plan for current accounts, reducing the deficit from year to year. From 1979 to 1980 we made a great step forward, reducing it from $3.7 to $2.3 billion. This year we would like to be below $2 billion. To support that kind of deficit we will be borrowing (in foreign markets).
Borrowing: The program calls for about $2 billion borrowing, one-third from the IMF (International Monetary Fund), the rest from OPEC countries and from banks in the United States, Canada, Britain, and Japan, and from West Germany, France, and Italy. We are doing our own recycling of money from both OPEC and developed nations by spreading our borrowing over a large number of markets. And having the support of the IMF, we believe it will be possible to fulfill it.
Trade deficit: The prospects don't depend only on us. The bilateral markets of Eastern Europe are very open in trading with Yugoslavia. Our major market is the Soviet Union. So there is logic in maintaining that trade and allowing it to grow normally. We do not have such an open market in Western Europe.
The European Community (EC) is getting more and more closed every day. Whatever efforts we do make to export, if we are successful, then immediately there is one pretext or another to tell us not to export this commodity in such quantities. Someone is hurt, either local industry or unemployment (we are told). So we have to find out how to penetrate those markets. Generally, we try not to decrease exports to the East, but to increase exports to the West. My experience would not justify optimism.
Cutbacks in investment. Here I'm more optimistic. In 1979 the long-term trend of growing investment peaked, with 40 percent of GNP reallocated for investment. This is something which no economy in the world can support. Therefore we started with measures to reduce this to a more bearable rate. This year we have continued with restricting investments and returning back more and more to normal growth, though we still have to make further efforts.