Serbia's Economy Falters, but Not from Sanctions but Embargoes Have Boosted the Fortunes of Black-Marketeers; Gas Is Still Easy to Come by. AFTER A YEAR OF UN CURBS

Article excerpt

ONE year after United Nations sanctions were imposed on Serbia and Montenegro, gasoline and other proscribed foreign items remain plentiful - gas, for instance, is easily obtained for about $4.50 a gallon from the country's many black-marketeers.

Such abundance raises questions about the effectiveness of the sanctions, which include petroleum and trade embargoes aimed at punishing the rump Yugoslav union for its sponsorship of the Bosnian Serb division of neighboring Bosnia-Herzegovina.

But even amid such plenty, only a shrinking minority of the country's 10.5 million people can afford the prices of smuggled goods or the much lower costs of many domestic products, including basic commodities, because of hyper-inflation.

The price surges - more than 280,000 percent since May 1992 - are just one indication that what was the most affluent country in the former communist world is in the throes of total economic collapse.

Other signs include:

* About 2.6 million people, out of a work force of 3.4 million, are unemployed or on "forced vacation" from factories and companies idled by sanctions.

* The average monthly in-come has fallen to $25.

* Production dropped 40 percent over the past year.

* Shortages of many essential commodities are common.

* A leading private bank collapsed and a second was temporarily closed.

* The crime rate has soared.

* And a new 5-million dinar note has been released - weeks after the introduction of the 500,000-dinar note - amid soaring black-market rates for the deutsche mark and the US dollar.

The crisis also can be seen in the massive lines of commuters caused by cutbacks in public transportation and in the critical shortages of medicines and other items in hospitals. Chaos was inevitable

But many economists, political analysts, and Western diplomats say that such a cataclysm was inevitable without the sanctions. Efforts to apply Western-style market reforms here have failed, and with the collapse of former Yugoslavia, an unrestricted amount of dinars have been printed to pay for three wars in less than two years.

"This started in early 1989 and was merely enhanced by the sanctions," said Tomislav Popovic, the director of Belgrade's Institute of Economic Science. …

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