Yugoslavia - Current economic position and prospects (Vol. 1 of 3) : Main report

RETURN~ TO RESTRICTED ,rPORTS DESK Report No. EA-162a ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION C 0 z --i CURRENT ECONOMIC POSITION C x . O 2 AND PROSPECTS 0 OFO OF ' Z I YUGOSLAVIA > (in two volumes) # VOLUME I THE MAIN REPORT September 8, 1966 Europe and Middle East Department CURRENCY EQUIVALENTS U. S. $1 = 12. 5 dinar s 1 dinar = U. S. $ .08 (all figures are in new dinars) PREFACE This report is based on the findings of a mission in March/April, 1966 to Yugoslavia composed of Messrs. N.Ab Sarma and J.A. Simmons (of the Bank), Professor Joel Dirlam (consultant to the Bank), Mr. Claude Mouton (consultant to F.A.0.) and Mr. Claude Hubert (consultant to the Bank). TABLE OF CONTENTS Page No. BASIC DATA (i) SUMMARY AND CONCLU IONS (iii) I. THE ECONOMIC 3YSTEM AND THE ECONOMIC REFORM 1 Some Features of the Economy 1 The Economi ; Reform 2 II. TRENDS IN JUTPUT AND IN THE MAIN SECTORS OF THE ECONOMY 5 The Growti of Output 5 Resources Allocation: Investment Levels 6 Agriculture 8 Industry 10 Transport 12 Electric Power 15 III. GOVERNMENT FINANCES 18 Revenues 18 Expenditures 20 Overall Fiscal Position 22 IV. MONEY AND CREDIT 24 The Banking System 24 Short-term Credits 26 Investment Credits 28 V. THE EXTERNAL SECTOR 31 Exports 31 Imports 33 Services 36 Balance on Current Account 36 The Development Plan 1966-70 and Foreign Trade 37 External Debt 40 Foreign Exchange Reserves 42 VI. GROWTH PROSPECTS AND CREDITWORTHINESS 44 The Development Plan 1966-70 44 Appraisal 47 STATISTICAL APPENDIX: Tables 1 - 35. (i) BASIC DATA Area: 100,000 square miles Population: 19.5 million Rate of growth (1955-65): 1.0% p.a. Density per square mile: 195 Gross Social Product (1965): D. 75.3 billion Rate of growth (1953-64): 8.6% p.a. (1965) : 2.3% Per capita (1965) : U.S. $450-5001 Per cent of Gross Social Product (1965) Agriculture and forestry 29 Mining and manufacturing 37 Construction 7 Transport and communications 7 Trade and catering 14 Other 6 Per cent of Gross Social Product 1964 1961-1964 Gross investment 41 42 Gross saving 38 40 Current Account Deficit on goods and services 3 2 Investment income payments 1 0.5 Government current revenues 21 23 Resource Gap as Per Cent of Investment 7 5 Money and Credit 1965 Rate of Change (Din. billion) 1961-65 Total money supply 27.4 23% Time and savings deposits 16.2 17% Bank credit to enterprises 38.8 14% Rate of change in prices (retail) 3% 15% Public Sector Operations 1965 Rate of Change (Din. billion) 1961-6. Government current receipts 15.5 13% Government currertexpenditures 14.3 11% Surplus 1.2 Government capital expenditures 0.9 1/ Figure adjusted to OECD National Accounts concept and to allow for exchange rate adjustment in July, 1965. (ii) External Public Debt (U.S.$ million) 1965 1960-65 Average Total debt outstanding (Dec.) 2,012 1,090 Total annual debt service 248 141 Ratio of debt service to foreign exchange earnings 17% 14% Balance of Payments (U.S. $ million) 1965 Rate of Change 1960-65 Total exports 1118 14% Total imports - 1321 9% Net invisibles of which 191 26% investment income - 43 31% Net current balance 39 - Commodity concentration 1965 1961-65 of exports: meat: 14% 12% Gross foreign exchange 1965 1961-65 reserves: (December) (Average) convertible currencies 104 76 payments agreements 65 42 (or 6 weeks (or 77weeks imports) imports) I.M.F. Position (U.S. $ million) 1966 1961-65 (June) (Average) Quota 150 120 Drawings (outstanding) 118 93 (iii) SUMMARY AND CONCLUSIONS 1. Since the break with the Cominform in 1948, the organization of the Yugoslav economy has been modified. The abandonment of central planning and the adoption of a system of social self-management pro- pelled enterprises towards producing for the market. While many economic decisions continued to remain with government at various levels - for example decisions on investment, on the use of foreign exchange and to a considerable extent on prices, - increasingly the responsibility for economic decisions devolved upon enterprises guided to a growing extent by market forces. The changes in the economic system in recent years, culminating in the Economic Reform of July, 1965, have together con- stituted a further major step in this direction. The abolition of taxation on the incomes of enterprises and of politically controlled social investment funds, the reconstitution of banks with "ownership" and control resting mainly with economic enterprises, and the increased responsibilities of banks particularly in regard to investment financing, are steps which are intended to shift the main responsibility for investment decisions from government to economic enterprises (including banks). Whereas in the past government controlled about 60-70% of all investment and enterprises the remainder, these proportions are expected to be reversed in the future. 2. While government at all levels will retain important responsi- bilities - for example at the Federal level for defense, for invest- ment in basic infrastructure, particularly in roads and railways, and for developing the less developed regions - nevertheless the reduction in the overall role of government in the economy in recent years is expected to continue. Total expenditures of all governments are planned to expand less rapidly than the national income, the role of government as investor will gradually be further reduced, and the fiscal system has been modified so as to exert relatively little influence on the formation of producers' prices. 3. The correction of past price distortions and the closer integration of the Yugoslav with the world economy were also major objectives of the Economic Reform. The greater relative increases in the prices of agricultural products, basic materials, electricity, and transport, the adjustment of prices generally towards levels pre- vailing in international markets, and the devaluation of the dinar were designed to correct the earlier misallocation of resources, to put pressure on manufacturing industry to increase its efficiency, and, when combined with substantial import liberalization, to expose the Yugoslav economy both internally and externally to greater competition. 4. Yugoslavia has achieved an impressive growth in output in the period since 1952, with gross material social product rising on average by 9-10% annually. Industrial production rose by almost 12.5% annually, while agricultural output, which did not recover to pre- World War II levels until 1955, has since risen by 4-5% each year. In (iv) 1963 and 1964, largely as a result of an investment boom, output rose more rapidly - by 12% in each year, with industrial production rising by 16%. Imports rose sharply and the trade deficit increased from $200 million in 1962 to $438 million in 1964. This rate of growth of the economy could not be sustained and restraint of domestic demand, especially of investment outlays, became the keynote of policy in 1965. The measures taken during 1965, including the devaluation of the dinar, helped to reduce the trade deficit considerably, and for the first time in the post-war period there was a small overall current surplus on the balance of payments. Since the end of 1965, domestic demand conditions have been effectively regulated, and the necessary fiscal and credit restraint has been enforced. 5. The establishment of a better balance in the external account was an essential pre-requisite to the objective of the Economic Reform of opening the economy to the world market by substantial import liberal- ization. In spite of assistance from the I.M.F., however, external reserves have not yet been adequate to allow the planned import liberal- ization to take place. The further strengthening of the balance of payments and of external reserves is, therefore, a prime policy objective in 1966 in order that major import liberalination can be introduced at the turn of the year. While this is a firm policy objective, the out- look is clouded by the very heavy debt service obligations facing Yugoslavia over the next three years, resulting largely from the con- traction of heavy medium-term obligations, mainly in the form of suppliers' credits, in recent years. Arrangements concluded so far to reschedule repayments falling due in 1966 have provided only modest relief and in several cases postpone 1966-67 payments only until 1968 and 1969. If the main part of the obligations falling due in the next five years could be deferred for 5-10 years, Yugoslavia could proceed with the modernization of industry required to sustain expansion in the years ahead. If such relief is to be obtained, however, it is vital that Yugoslavia should exercise the utmost restraint in con- tracting new short- and medium-term obligations in the next five years. 6. Yugoslavia has prepared a five-year Plan for the period 1966-1970. This sets broad objectives for the overall growth of the economy, for the levels of consumption and investment, and for the growth of imports and exports. In addition, major specific projects, for example in railway transport, electric power and steel, are in- cluded in the Plan. The Development Plan has growth targets for social product of 7.5-8.5% annually - no higher than the actual growth achieved during 1961-65, - it incorporates desirable changes in investment priorities and stresses consolidation and stability requirements. 7. If the broad objectives of the Plan are to be realized, Yugoslavia would need further external assistance in 1966-1970. Taking into account the possibilities of export growth, import requirements, likely further improvement in the net invisibles position, debt repay- ments falling due, and minimum reserve requirements, gross capital re- quirements may be placed at about $250 million a year. Part of this could be provided by debt rescheduling. (v) 8. While Yugoslavia's debt servicing obligations, par- ticularly in convertible currencies, over the next several years are very heavy, (averaging 30.35% of expected convertible currency earnings in 1966-68), it must be remembered that the figures relate to the total not only the "public" external debt. Nevertheless the obligations are such that it would be desirable for new external assistance to be provided on terms which would add the minimum ad- ditional servicing obligations during the next five years. If adequate assistance on suitable terms can be provided during this period, so that the objectives of the economic reform can be realized and the modernization of industry carried out, the past growth record of the Yugoslav economy indicates that by the early 1970's, the economy could have developed to a point where its further need for a net inflow of foreign capital might be quite small. Taking these factors into consideration, and also the flexible policy approach of the Yugoslav authorities, there can be little doubt that despite the short-term difficulties Yugoslavia is creditworthy for further Bank lending. CHAPTER 1. THE ECONOMIC SYSTEH AND ECONOMIC REFORM Some Features of the Economy 1. Yugoslavia is a federal state where there is pronounced regionalism and devolution of authority, and a socialist state in which social ownership of the means of production and workers' self-management prevails rather than state ownership. The Federal Assembly is the supreme organ of government and the main executive agency is the Execu- tive Council. The organization of government in the republics is similar to that at the federal level. Wihile the commune is the smallest political subdivision, it is the foundation of the political system. Each commune has an assembly and its own administrative organs. In addition to pro- viding the usual municipal services, the commune performs important economic functions; it often has taken the initiative in setting up new economic enterprises. 2. Private farming accounts for the larger part of agricultural output, and takes up over 70% of total agricultural area. The peasant farms are small, the average being a little over 4 hectares; the ceiling limit is 10 hectares. There are also individual craftsmen and traders working on their own. Private ownership of houses is allowed, with limits regarding size. For the rest, the economic enterprise, socially owned and with workers' management, is typical. Even transport and electricity undertakings are thus organized. 3. Workers' management as it obtains today is the outcome of about 15 years of experimentation and change. The basis of workers' management is the legal requirement that no decision can become effective without the consent of the work force or its elected bodies and that the director or general manager of an enterprise shares the functions of management with the workers. In practice, the effective degree of workers' participation in management varies. Gradually, various features of the market mechanism, especially in pricing and in the working of business enterprises, have developed in the economy. 4. The turning point came quite early in the postwar period, with the break with the Cominform in 1948. A centralized five-year plan had been adopted for the period 1947-51. The two or three years following the break with the Cominform were a transitional phase of considerable diffi- culty when trade with the U.S.S.R. and other East European countries ceased, and defense outlays had to be stepped up. Particularly since 1952, planning has been decentralized. 5. The process of decentralization is clearly seen in investment, and in financial operations generally. Until 1953, investment was done administratively through the budgets. Then, various institutional channels were set up for the purpose, in particular the investment funds at federal, republic and commune levels. Still, governments had the decisive voice in - 2 - this activity. With the abolition of these funds during 1963-1965 and the consequent strengthening of the investment banks and the reorganiza- tion of communal banks into a smaller number of commercial banks, the financial institutions are now truly coming into their own. 6. During the period of such decentralized planning, i.e. since about 1952, the growth rate of the economy has been impressive. In the process, however, various deficiencies and problems came to be pointed up. For many years agricultural commodity prices had been kept low, to facilitate industrialization; similarly prices of transportation and electricity services remained depressed. In consequence, serious distortions developed in the price structure, contributing to some misallocation of resources. In 1963 and 1964, when growth rates were particularly high, an inflationary situation emerged, and was reflected in a considerable rise in imports and payments deficits. Several measures were taken in the second half of 1964 and early months of 1965 to contain and counter the inflationary pressures - in fiscal and credit matters, in foreign trade, and in investment. Restraint of domestic demand, especially of investment, was the keynote of policy for 1965. The economic situation of the country in 1964-65 provided an opportunity for adopting certain policies which have a longer term import. The Economic Reform 7. The economic reform being implemented since July 1965 is not altogether a departure. At the time of the 1961 devaluation of the dinar, some economic reorganization was attempted. In fact, the decentralization of investment decisions, giving greater role to economic organizations and reducing the role of government, has been under way over a longer period still. Thus, the economic reform is a continuation of earlier efforts, but is more decisive and purposeful. 8. While the change in par value of the dinar and other specific steps are important features of the reform, the objectives are more fundamental and forward-looking. In the main, the reforms seek to improve the system of self-management in enterprises, reduce the role of government in the economy, particularly in industry. It is con- sidered necessary to undertake these reforms so as to ensure continued growth under conditions of stability, essentially by according increasing importance to market forces and by linking the economy to world market conditions. 9. A principle underlying the economic reforms is that all prices, with but few exceptions, should be determined in the market. However, prices still remain fixed or administered. Immediately after the reforms were introduced in July 1965, nearly 90% of industrial commodity prices were fixed at what were considered market levels, - 3 - taking import and export prices in trade with convertible currency areas as basis. As a rule, agricultural prices have remained free market prices, with guaranteed prices for a few items. In recent years, particularly since 1963, agricultural prices have risen. On the whole, the distortions between prices of agricultural commodities and raw materials on the one hand and of industrial manufactures on the other, seem to have been largely corrected. It is expected that this would stimulate agricultural production and its marketing. The more significant trends in producers' prices are reproduced below. Table 1. Producers' Prices (1960 =100) July December 1961 1963 1964 1965 1965 1965 Agriculture 115 146 180 256 2h 282 Industry 104 105 110 127 120 138 a) Capital goods 101 101 102 100 108 114 b) Raw materials 105 105 110 127 118 141 c) Consumer goods 101 105 110 130 125 140 d) Non-ferrous metals 100 95 99 127 113 153 10. On July 26, 1965 Yugoslavia devalued the dinar by 40% when the par value was fixed at Din. 1250 = $1. Until then, since January 1961, all exchange transactions took place at Din. 750 to the dollar. A new dinar equal to 100 old dinars having been introduced on January 1, 1966, the exchange rate is Din. 12.50 = $1. Concurrently with devalua- tion, the export premiums that were being paid from the budget were abolished, and customs tariff was revised downward from an average rate of 21% to 10.5%. A stand-by credit for $80 million was approved by the Fund, in support of this and other measures. With a view to keeping the rate of increase in money supply below the rate of economic growth, the authorities decided to continue restrictive credit measures and to limit expansion of bank credit within a prescribed ceiling; the govern- ment budget was to be balanced. 11. Government indebtedness to the banking system has shown only a very nominal increase during each of the years 1963, 1964, and 1965. Various changes have been made in the tax system during 1964 and 1965, mainly to reduce the burden of taxation on economic enter- prises. Even so, with the abolition of most subsidies, and other reductions in certain expenditure items, the Federal budget remains balanced for 1966. As for bank credit, total bank credit expanded by 7% in 1965, and short term credit by 10%, and the expansion has remained within the ceilings that were set. The rise in money supply in 1965 was 8%, as against 19% in 1964 and 305 in 1963;l/ the increase in gross social product in 1965 was 25% in nominal terms and 354 in real terms. As for personal incomes, they increased by 2% in real terms in 1965, though in nominal terms the rise was 38%. In fact, after July 1965, i.e. after the reform, real personal incomes were about 3% lower than in the corresponding period of 1964. In the second half of 1965, total investment was about 5% lower than in the corresponding period of 1964 in nominal terms; real investment was considerably less. 12. As expected, these measures have had a favorable impact on the balance of payments position. Partly as a result of these measures, the trade deficit in 1965, about $200 million, was as low as in 1962 and smaller than in any other year since 1960. And, for the first time, the current account shows a small surplus. However, having drawn the entire stand-by credit of $80 million from the Fund, Yugoslavia finds its foreign exchange reserves position today only marginally better than in 1963-65. 13. The level of reserves may be seen against an annual import total of nearly $1300 million. When viewed in this context, the inability so far of Yugoslavia to liberalize imports is under- standable. Liberalization of imports of all raw materials and spare parts, with some minor exceptions, was one of the undertakings made at the time of exchange reform. Now that domestic inflationary pressures have been brought under control, the authorities are seriously examining the possibilities for import liberalization and expect that the first stage of liberalization (i.e. of raw materials, spare parts, and some finished goods) could be effected towards the end of 1966 or very early in 1967. They also expect the foreign exchange reserves to be built up by then. 1/ According to revised data on money supply, there was virtually no increase in 1965, as against a rise of 13% in 1964. CHAPTER 2. TRENDS IN OUTPUT AND IN THE MAIN SECTORS OF THE ECONOMY Economic Growth 14. After the difficulties of the initial postwar years, Yugoslavia has achieved an impressive growth in real social product. On the average, real social material product has risen by 9 - 10% annually during the period since 1952. In 1961 and 1962 growth rates were only 4 - 51, much lower than was eipected, and at the beginning of 1963 the economy had substantial unused capacity. The authorities took measures to stimulate growth and in 1963 and 1964 real growth rates of about 12% were recorded in each year. In these two years, while growth rates were higher in industry, agriculture also did well. The rate of growth expected for 1965 was 9%, but in fact it seems to have been about 3%, mainly due to a fall in agricultural output caused by unfavorable weather conditions. 15. The high growth rates recorded since the war have been in large part a reflection of the emphasis given to the expansion of manu- facturing industry, which grew on the average by 12.5% annually from 1952 through 1965. There has been a substantial shift of workers from agriculture into industry and allied activities, and the growth in manufacturing output in the 1950's was mainly attributable to this factor. Since 1960 the growth in industrial employment and rising productivity have contributed about equally to the expansion of manufacturing output. 16. Agricultural output over the postwar period has risen much more slowly. By the mid-1950's output levels were little higher than in the prewar years. Since then growth rates have increased, though much more slowly than in manufacturing. Outnut of the principal cereal crops in 1964/65 was about 50% greater than in 1955, while output of industrial crops had more than doubled over the same period. Production is still, however, greatly affected by seasonal variations; for example, the index of agricultural output (1960 = 100) was 117 in 1964, but only 108 in 1965. 17. In 1965 the share of mining and manufacturing in gross material product was 37% and that of agriculture 27%. Construction and transport each accounted for about 7% of social product, and commerce, hotels and catering for about 14%. These proportions are somewhat higher than they would be on the basis of customary national accounts estimates, as the Yugoslav estimates exclude the value of government administration, housing and certain other services. As such, estimates of social material pro- duct are about 12 - 15% less than national product estimates according to the customary coverage. 18. Of total output over three-quarters is produced in the socialised sector. The private sector is principally in agriculture, accounting for approximately three-quarters of agricultural output and over 70% - 6 - of the area under cultivation. In terms of total employment, the private sector is still large; about 60% of the economically active population work in the private sector, mostly as peasant farmers. The large reserve of labor in agriculture is a favorable factor in considering the longer-term growth potential of the Yugoslav economy. Resources Allocation: Investment Levels 19. Underlying the impressive growth of the economy over the past fifteen years has been the high level of investment, particularly in fixed assets. Total investments in fixed assets and working capital amounted to nearly 43% of gross material social product in recent years. In 1963 and 1964 there was an investment boom, and in each of these two years investment in fixed assets accounted for over one-third of social product. The distribution of gross material social product between consumption and investment is shown in Table 2. Table 2: Distribution of Gross Material Social Product (at current prices, in billions of dinars) 1960 1961 1962 1963 1964 Total 28.9 33.7 37.7 45.8 60.9 Personal consumption 14.9 17.6 19.5 23.1 29.6 Collective consumption 3.8 4.6 5.0 5.4 6.3 Gross investments in fixed assets 9.4 11.7 13.3 15.9 20.4 Exports less imports of commodities and services -0.6 -0.8 -0.3 -0.9 -1.8 OtherV' 1.4 0.7 0.2 2.4 6.4 1/ A residual item, which includes movements in stocks. 20. During the period 1961-1964 fixed investment in the social sector increased on the average by nearly 13% annually. In 1963 and 1964 the rise was particularly fast, with high investment being augmented especially in the latter year by heavy expenditures on the reconstruction of Skopje. Transport, power and manufacturing industry have been the major categories of fixed investment, accounting for 50% of total fixed investment in the social sector for 1964. Agriculture accounted for 9%. As a result of measures taken to curb the investment boom in 1964, fixed investment in the social sector in 1965 fell by 10%. The trends in fixed investment at constant prices and its breakdown by types are shown in Table 3. Table 3: (Gross) Investments in Fixed Assets - Social Sector (at 1962 prices) (in billions of dinars) 1960 1961 1962 1963 196h 1965 Total 10.h 11.3 12.3 1h.2 16.7 15.1 'Economic' 7.6 8.0 8.h 9.6 11.6 10.1 'Non-economic' 21 2.8 3.3 3.9 4.6 5.1 h.9 Industry and mining Z/ 3.6 4.2 h.5 5.2 6.1 5.5 Transport 1.7 1.7 1.6 1.6 2.2 1.9 Agriculture 1.3 1.1 1.2 1.4 1.5 1.2 1/ Mainly housing, other utilities, government buildings, cultural and social activity. 2/ Industry category includes electric power. 21. As mentioned in Chapter 1, there has been a marked shift in the mobilization of savings and the financing of investment. In the immediate postwar period the greater part of investment financing was made through budgetary grants, with savings accumulated by government through taxation. During the 1950's and until 1963, savings were channelled in loan form through investment funds at various levels of government with resources coming from general tax revenues, the annual levy on capital assets of enterprises and loan repayments. With the abolition of investment funds after 1963 and the reduction in taxation of enterprises, the role of government in the financing of investment has been greatly reduced, and the role of banks and of enterprises has been correspondingly increased. While government (at all levels) financed nearly 62% of investment in fixed assets in the social sector in 1960, it financed only 26% in 1965. The share of enterprises in financing investment remained roughly stable over the period, but the share of banks rose from 1% in 1960 to 36% in 1965. 22. Gross savings formed about 30% of gross national product in the fifties; during 1960-65 the proportion was 401, and was especially high during 1964 and 1965 at 4L-45%. The share of Government in total savings was predominant until about 1950, was quite substantial in the early fifties, but has since declined significantly. The pattern of savings is indicated in Table L. - 8 - Table 4: Gross Money Saving 1 Billion dinars Percentage share 1953 195 1963 1965 195 196 1965 Enterprises 1.4 3.0 5.5 18.3 43 h6 29 58 Households 0.5 0.8 2.4 3.6 17 12 13 12 Government 1.8 3.8 8.6 5.0 56 59 45 16 Other organizations -0.5 -1.2 2g 4 -16 -17 D 16 Total 3.2 6.h 19.0 31.3 100 100 100 100 1 From a paper by an official of the National Bank of Yugoslavia: data for 1965 are provisional Agriculture 23. In the period between the two World Wars, agriculture was the largest sector in the economy and even with the rapid development of industry following World War II, agriculture still accounts for about 25% of gross social product. Of total output in agriculture about three- quarters comes from private farms. 2h. Agricultural yields in Yugoslavia were among the lowest in Europe before 1940, and agriculture suffered material damage during the war. In an effort to expand agricultural production rapidly, in the early post-war years, the Government decided to establish large socially owned enterprises which would be amenable to the application of modern technology. The social sector which comprises large farms and cooper- atives of various kinds is technically up to date; yields are high but there is a rather narrow specialization in crop production (wheat, maize and sugar beet) and in fattening livestock. Among those private farmers who are organized through general cooperatives though they are not members of the cooperatives, modern technology is gradually being applied and output is expanding. The private sector proper is the larger and backward part of Yugoslavia's agriculture, with a high degree of self-sufficiency and low productivity. The private sector is com- posed of owner-farmers who hold over 70% of total agricultural area. Farms are small (the average being 4.2 hectares) and are also fragmented. 25. Over the post-war period priority has been given to expanding output in the social sector, which now accounts for almost 30% of wheat production, 15% of maize production, and 67% of sugar beet. Yields in the social sector compare favorably with yields in other European countries as shown in Table 5. - 9 - Table 5: Yields of Wheat and Maize: 1963 (Quintals per ha.) Yugoslavia Italy France Nether- Swit- Ger- Social Farms Private Farms lands zer- many 'in co-op' without co-op' land F.R. Wheat 3h.2 21.3 ih.6 18.5 26.6 42.0 28.h 35.1 1aize h5.8 31.3 17.3 33.2 39.4 h2.6 h8.8 36.4 As shown in Table 5 yields in the private sector of agriculture are much below those in the social sector, and as Table 6 shows production on private farms has increased very little in the past five years. Table 6: Indices of Agricultural Production 1960 = 100 1961 1962 1963 1964 1965 (1) Agriculture (total) 97 100 111 117 108 Social Sector 101 123 1h2 164 170 Private Farms 96 97 106 110 100 (1) Preliminary data. 26. Yugoslavia is self-sufficient in cheese, milk, potatoes and vegetables; is deficient in wheat, sugar, butter and fats and oils; has surpluses in coarse grains, mainly maize, meat (cattle and pigs), fish and fruit (prunes). While agricultural exports represent a decreasing share in the value of total exports (23% in 1961 and 17% in 1965), the share of agricultural imports is stable (about 15%). Neat is the most important item of export, and wheat of imports. Forestry products also are important in exports, accounting for about 5% of the total. 27. In the early post-war years, prices of agricultural products were deliberately depressed as priority was given to the expansion of industry. The resulting price distortion and misallocation of investment resources was corrected by a readjustment of prices in the past several years. Prior to the Economic Reform of 1965, the prices of agricultural products were substantially increased, and with the further adjustment made at the time of the Reform and the devaluation of the dinar, prices now are related closely to those in world markets. The increases in prices and in the profitability of agriculture are expected to result in - 10 - an expansion of production, and more especially in the marketed share of output. 28. During the 1966-70 Plan period agricultural production is projected to rise by approximately 25%. Output of wheat and maize is projected to increase by 25% as a result of which wheat imports should cease, while maize exports should rise from 48,000 tons in 1965 to 700,000 tons in 1970. Neat production is projected to increase by 40% and meat exports to rise from 170,000 tons in 1965 to almost 230,000 tons in 1970. Whether these export possibilities are realized will depend to a considerable extent on the policies adopted by the E.E.C.. To achieve the additions to output it will be necessary to increase in- puts, particularly of improved seeds, fertilizers, farm machinery and agricultural credit. Increases in storage capacity, particularly of cold storage, will be necessary as well as an improvement in marketing. While considerable emphasis is being given to increasing the output of social farms, the yields on social farms are already high, as mentioned above. In the light of the large share of the private sector in agriculture and of current low yields in private farms, there would seem to be a strcng case for concentrating effort on improving yields in private agriculture. While the scope for mechanization in private agriculture is limited owing to the small size and fragmented nature of private holdings, there is considerable scope for increased use of chemical fertilizers and better seeds. 29. The price trends since 1963 and the economic reforms have had a favorable impact on agriculture - especially on private agriculture. It is also intended to provide enlarged credit and technical facilities to private farmers. The development plan for 1966-70 accords a higher proportion of investment to agriculture than hitherto. A more precise formulation of these policy approaches and a definitive allocation of correspondingly requisite resources would help to consolidate the gains made from the economic reform and help forward the production and export goals of the 1966-70 Plan in this sector. Industry 30. Manufacturing and mining contributed 37% of gross material product in 1965. Construction accounted for 7%. Only 18% of the active population, however, is employed in industry. From 1952 until 1965, the annual rate of growth in industrial employment has averaged 7.5/. Investment in industry and construction has also been high from 1952 through 1965, but it has dropped, as a share of total economic investment, from 73% in 1952 to 54.5% in 1964. Large investments and the fast growth of the labor force enabled Yugoslavia to maintain a high rate of growth of industrial output, averaging 12.4% annually from 1952 through 1965. 31. Corresponding with the high level of investment, manufacturing production has been weighted toward capital goods, which accounted for approximately 53% of output in 1964. As industrial output rose, the composition of exports shifted from the pre-war concentration on agricultural and mineral products to predominantly manufactured products. - 11 - Capital equipment exports in the past two years have been equivalent in value to half the capital equipment imports. 32. The rapid rate of expansion in industrial output and exports has not been matched by a comparable rise in labor productivity. From 1952 through 1964, the annual rate of increase in productivity was 4.9%, with petroleum, electric power, and electrical machinery averaging somewhat higher. The year by year changes in productivity are shown in Table 7. Table 7: Employment and Productivity of labor in Industry (Indices in relation to previous year) 1958 1959 1960 1961 1962 1963 196h 1965 Average employment 108 106 107 105 101 104 109 104 Production 111 113 115 107 107 116 116 108 Overall productivity of labor 103 107 107 102 106 112 107 10 33. Yugoslav industry is oriented largely to Western technology. However, having developed under a highly protective system, it has tended to become over-diversified, and some units are too small to be efficient. Furthermore, the commitment to the capital goods' industries imposes on Yugoslavia an ever-growing burden of investment to replace obsolescent fixed assets in these industries. Industrial machinery must compete with products of firms benefiting from the accelerating level of ex- penditures on research and development and the continuous renewal of plant characteristic of 11estern Europe and the U.S., and while the greater share of Yugoslav output is produced in plants built since World War II, many of these have already become obsolescent. 34. A main purpose of the economic reforms is to subject the domestic economy, especially its industry, to competition both domestically and from abroad. Under the circumstances, both from the viewpoint of continued domestic growth and export expansion, the modernization of industry assumes high priority. The major increases in exports in the coming years are expected in industrial items, particularly machinery and equipment. This will essentially revolve around modernization of these industries and their competitive efficiency, especially if exports to convertible currency areas are to expand. Modernization becomes even more urgent when domestically the price mechanism is largely freed and major import liberalization is effected, both of which are expected during the course of the year. Industrial investment in the next few years has to be devoted in the main to modernization of plant and equipment rather than for new units. Such modernization necessarily in- volves a degree of specialization, a process which already is under way - 12 - and will take a few years, and some inefficient units may fall by the wayside. Such implications and consequences seem to be realized and accepted by the authorities. 35. A main constraint on modernization seems to be availability of the necessary foreign exchange. The import content of industrial investment averaged 28% in 1964 - in particular branches of industry like iron and steel, paper, textiles, non-ferrous metallurgy, and coal, the ratio was relatively higher. When new investments are devoted mainly to accelerated modernization, the import content is likely to be even greater. It would be necessary for Yugoslavia to obtain some external credits so that the necessary retooling and re-equipment of major industries can proceed apace. Unless such modernization, at least on a selective basis, takes place quickly in the next two or three years, many of Yugoslav industries may find it increasingly difficult to compete in international markets with manufacturers in Western countries and a main purpose of the economic reforms may be defeated. 36. Investment programs for the coming five years are being developed by the different industries, drawing on plans of individual firms. The implementation of the programs will depend upon the ability of the firms to finance themselves, and upon their success in obtaining loans from the banks. Criteria of profitability and con- tribution to improvement of the foreign exchange position will be decisive in determining which enterprises, or groups of enterprises, get the loans. 37. The level of investment in industry, excluding electricity, for the next five years has been tentatively set at the equivalent of $500 million a year, of which the foreign exchange component may be of the order of $150 million. Industrial output is expected to grow by 9 - 10% annually. The Plan envisages that few new enterprises will be launched; the bulk of the investment funds, in part because they are controlled by existing firms, will be plowed back for modernization and expansion of present plant. The only new firms of magnitude envisaged for the five-year period are in integrated aluminum production and fabricating, and superphosphates. Major projects presently under construction are a doubling of capacity of the fertilizer plant at Pancevo, rolling mill facilities at Jesenice, and an integrated steel mill at Skopje. Transport 38. Large investments in transport have been made over the past five years, accounting for 18.5% of all fixed economic investments in the social sector. Traffic has increased by 10% annually in the case of passengers and about 15% annually in the case of freight. Although the rates of growth of traffic have been much faster in air and road trans- port, the railways are still the major carriers moving 51% of total passengers and 57% of total goods tonnage in 1965. Measured in ton- - 13 - kilometers, the railways accounted for two-thirds of all inland freight movements in 1965. 39. Within the transport sector, investments in road transport were as large as in the railways between 1961 and 1965. Over the five year period, work proceeded on two major highways - the central highway linking the principal cities of Ljubljana, Zagreb, Belgrade, Nis and Skopje and ponnecting with the Austrian and Greek fontiers, and on the Adriatic highway running from Rijeka through Split and Dubrovnik to Bar and thence to Titograd. Substantial investments were made also in road haulage and road passenger facilities whose capacities increased by about 100% and 65%, respectively. In railways investmentp wete made in the construction of a new standard -gauge1, jne from Sarajevo to the port of P.loce, expected to be completed this,year, and on the start of a program of Modetnizition ancelectriffication of mainlines, expected to be completed in 1968/69.,. Railway rolling stock capacity increased only marginally. over the quinquenium, but as wbrn out equipment was re- placed the utilization of capacity improved markedly. The bulk of the J?emainig investments were applied to sea and.,air transport, with expansions of about 25% and 33% in the capacities of the merchant marine and the airTays.respectivelyi,- port expansions 'particularly at P.loce and -Bar, and'new airports at Belgrade, Zagreb, Ljublijanal Dubrovnik and Skopje. l0. Notwithstanding these substantial investments,, there remain major deficiencids' "in'the transport system. .The railways at times of peak traffic, particularly at harvest, are unable to move all the traffic offering. Moreover, the quality of the service both in respect of speed and regularity is considered to be inadequate to present-day needs. Perhaps more important is the fact that large parts of the country are not served by the railway system and roads are often very poor. The rail network in Vojvodina, Croatia and Slovenia is reasonably complete and the main cities of the country are all connected by standard gauge lines. However, access to the sea from the centers of population and economic activity in the,eastern and southern parts of the country is very limited and traffic has 'to be routed by the long and circuitous route to the ports of Rijeka or Split or, to the extent possible, travel over the'.narrow gauge line from Sarajevo.to Ploce. Because of the large re- sulting disec6nomies the decisio4 was made to replace the Sarajevo - Ploce line, and similarly the expected large,cost'savings to the economy proyide the main.,justification-for-the construction of a new railway running southwest from Belgrade to -Titograd in M6ntenegro and thence to the port of' Bar. l 4. The,Belgrade-tar railway. t9gether'with the completion of the.SarajeVo-Plo'ce line, will account'for almost the whole of the in- vestments innew lines planned for the 1966-70 period. Greater in- vestments will, however, be needed to complete the modernization and electrifieatidn of mainlines, already referred to. This program,by replacing over-age average and worn-out equipment,.is-expected to-,inzrease driving power by about 35%, and by making-possiblefdster speeds and - 14 - the better utilization of equipment to increase total freight carrying capacity by about 25%. A significant change in the pattern of railway freight is the expected h0% fall in coal traffic by 1970 as the rail- ways themselves electrify and as other sources of energy are increasingly substituted for coal. Thus, within the overall increase of 25% in total freight traffic, traffic other than coal is expected to rise by almost 50%. Railway passengers are expected to increase by about a third, and capacity is planned to expand accordingly, but again primarily through the better utilization of modern equipment. 42. In highways, the major investments over the next five years will be in constructing short sections of the Central Highway, in completing the extension of the Adriatic Highway from Titograd to Skopje and in constructing the remaining sections of the principal transversal road connecting the Central and Adriatic highways through Sarajevo. While priority is rightly being given to completing the major road network (which will absorb about 60% of planned expenditures on new highways), the improvement of many secondary and feeder roads would also yield high returns. In the more remote mountainous regions of the country roads either do not exist or are rough tracks, but these areas are so far of limited significance economically; of greater im- portance are the secondary roads in the fertile plains of Vojvodina and Slavonia. Here, rural roads are often very poor, partly because suit- able road building materials are not locally available, but recent experiments have indicated that roads built in this area of a cement/earth mixture are technically feasible and might be economically justified, as large savings in transport costs would result. 43. With the major improvements in the highway network made over the past five years and planned for 1966-70, the fast growth in the road haulage business is expected to continue; the volume of road freight traffic is estimated to double over the quinquenium and of road passenger traffic to rise by about 55%. By 1970, it is estimated that road hauliers will be carrying 70 million tons of goods as compared with 90 million tons on the railways, while road passenger journeys are estimated to exceed slightly railway passenger journeys though in each case the average length of haul by road will be shorter. 4h. In air transport,'a new airport at Sarajero is planned for 1966-70 and there will be investment in new aircraft and associated facilities. Investments in sea transport will be largely in an expansion of Yugoslavia's merchant fleet which is expected to rise from about 1 million to not less than 1.4 million gross re- gistered tons, but there will be also a substantial expansion and modernization of ports. Total planned investment in transport in 1966-70 will be almost 25% greater than in 1961-65 and will account for a slightly higher proportion (19.2%) of total fixed economic investments in the social sector. - 15 - 45. With regard to the financing of transport investments, in accordance with the aims of the Economic Reform, the role of govern- ment as a supplier of capital will be less important and the role of the banks more important in the next five years than in 1961-65. Government will, however, continue to provide on a grant basis the main part of the resources required for the construction of new penaient ways - roads and railways. As in the past, transport enterprises themselves are expected to provide over 40% of investment funds from retained earnings. 46. To enable the enterprises to accumulate the necessary funds and to offset increases in costs resulting from measures of the Economic Reform and, in the case of the railways, the reduction in government subsidies, transport enterprises were permitted by government to increase rates in 1965. For the railways the increase was on average 32% to a level approximating to but still lower than the level of rates in Western Europe, while other limits were set for other branches of trans- port. Where competition, actual or potential, exists between different modes of transport rates have been adjusted accordingly. 47. The possibility of competition between different modes of transport raises the problem of coordination, but the authorities consider the problem is not yet acute as the transport network is much less extensive than in more developed countries and the transport needs of the economy are far from being fully met. Nevertheless, the problem exists and as roads are improved, competition could grow and the ability of transport enterprises to accumulate funds for re-investment might be affected. On the other hand, as the process of integration gets under way, and the number of enterprises is reduced, and larger enterprises function more efficiently than at present, particularly in road trans- port, their financial resources may improve. At present, there are 6 railway enterprises and 165 road transport enterprises. Electric Power 48. Since 1960, electric power supplies have grown rapidly. Output, including that of industrial power plants, rose on average by 11.75% annually to 15.5 billion kwh in 1965; installed capacity of the integrated power system increased by about 50% to 3,200 MW; and investment in the industry totalled Din. 4.7 billion over the period, equivalent to 7.4% of all fixed economic investments in the social sector. Despite the fast growth of production, about double the average of Western Europe, output was insufficient to meet demand in full. The deficit was met in part from imports, averaging 0.4 billion kwh in 1964 and 1965, which reduced the average net shortfall in supplies to approximately 1.0 billion kwh in each year. 49. In the earlier post-war period, heavy emphasis was given to the development of hydro-electric power. By 1960, of total installed capacity of 2,000 MW, two-thirds was in hydro plants. Many of the latter are run-of-the-river and in spite of increases in storage capacity - 16 - in recent years there is still a substantial drop in output in the low-water season (late summer). Output varies also between wet and dry years. The need to secure firm supplies has been one factor leading to a greater emphasis on thermal power in recent years. Al- though the balance between hydro and thermal plants had changed only slightly by 1965, with the completion of the plants now in course of construction there will be a marked shift by 1970, when thermal capacity is expected to account for about half of the total installed as com- pared with 40% in 1965. Other reasons for this change in emphasis are the availability of large deposits of lignite suitable for open cast mining and thermal power development, the need to build plants quickly to make good existing shortfalls and to keep pace with the expected fast growth in demand, and the lower capital costs of thermal plants which have become more attractive economically as more realistic measures of the cost of capital have been adopted. The balance will, however, tend to shift back towards hydro-power with the commissioning of the Iron Gate's project on the Danube in 1970-72. This project, of 2000 MW capacity, is being built by Romania and Yugoslavia together and they will share equally in its output. 50. The growth in demand for power over the next five years is projected at a rate of 14% annually, which is slightly higer than the growth rate from 1960-65, and takes into account the demands of major new industrial consumers such as the steelworks at Skopje, and new fertilizer and electro-metallurgical plants. With the commissioning of power plants now in course of construction 2000 MW will be added to capacity by 1968, but output is not expected to meet demand until 1969 when another 670 MW will be commissioned, followed by a further 400 MW in 1970. It is hoped to make up much of the shortfall in supplies, expected to be as much as 2 billion kwh in 1967, from imports. Total output for 1970 is planned to be 30.5 billion kwh, though the likeli- hood of some shortfall in this is not ruled out. 51. Investment in power generation and trarsmission during 1966-70 is estimated to total Din. 7.1 billion, equivalent to about 8% of all fixed economic investments in the social sector over the period. 52. Consistent with the objectives of the Economic Reform, the future pattern of financing investment in electricity will change. In the past, rates for electricity have been at levels which have yielded a low return on net fixed investment (3.6% in 1964) and have enabled electricity enterprises to finance only a small part of new investment from their own resources. About 80% of investment funds have been pro- vided by the Federal and Republican Governments, channeled through the Investment Bank. As part of the Economic Reform, electricity rates were raised substantially: by an average of 420 in the rates charged to purchasers from the grid and of 31% in the rates charged by distributing enterprises. In the case of power-intensive industries and domestic - 17 - consumers, who had previously been charged relatively low rates, the in- creases were 82% and 86%, respectively. The latter increase could well have some impact on the growth of demand but this is not expected to be such as to require a revision of investment plans. 53. Following the rate increases, and with the continuing favored treatment of the electricity industry in respect of the capital levy paid to the Federal Government (at 1%) and the rate of interest paid on loans (at 2%), electricity enterprises are expected to be able in the future to accumulate funds sufficient to finance a major part of their new investments. As a corollary to this, the Investment Bank, utilizing Federal funds, expects in future to finance only 20% of the cost of new power projects. 54. Electricity enterprises in financing their expansion will be able to borrow from banks or other enterprises. At present, the 48 separate generating enterprises, which are co-ordinated through the Electric Power Community, may group themselves into business associations and transfer some of their funds to such associated enterprises. They will, however, have discretion in using their own retained earnings which need not be re-invested in the power industry if more profitable alternatives a re available. In this context, the organization of the industry with so many separate enterprises, which are not required to pool accumulated surpluses, could perhaps lead to a diversion of investment funds away from the industry, funds which the increases in electricity tariffs were designed to provide. Even if this does not occur, the reorgaiization of the industry into fewer enterprises would probably simplify the financing of investment and, at the same time, secure economies in operations. - 18 - CHAPTER 3. GOVERMENT FINANCES 55. The federal and decentralized system of the country is reflected in the general structure of the budget: revenues and expen- ditures of the federal budget represent slightly less than one-half of total revenues and expenditures of all budgets combined. Revenues 56. The following table is a summary presentation of the revenues of federal and local governments in 1964, 1965 and 1966. Table 8. Revenues of Federal and Local Governments: Main Items, 1964-1966 (in billions of dinars) 196a/7 1965 19662-/ Federal Local Total Federal Local Total Federal Total revenues 7.3 7.4 14.7 7.1 8.4 15.5 7.9 of which: Turnover taxes 4.5 1.1 5.6 3.7 1.5 5t2 4&7 Taxes on income of enterprises 0.2 0.1 0.3 - - -- Taxes on personal incomes 0.5 4.9 5.4 1.0 5.0 6.0 1.3 Customs duties 2.3 - 2.3 1.8 - 1.8 1.7 1/ Original data adjusted to conform, to the extent possible, to new presentation adopted in 1965. 2/ Local budget estimates for 1966 are not available. Significant changes have taken place in the pattern of government revenues in recent years. These are essentially characterized by the elimination of taxes on the income of enterprises and by a comprehensive reform of the turnover tax, introduced in 1965. It is estimated that turnover taxes form 44% of total revenues of all budgets in 1966, as against 34% in 1961; taxes W 19 W on income of enterprises contributed 17% in 1961, and are altogether eliminated in 1966. The turnover tax forms about 60% of Federal revenues. The Federal government has no tax collecting machinery of its own except for customs. All other taxes, for all governments, are collected by the communes. 57. The basic idea underlying the reform of the turnover tax is to curb the influence of the tax system in the formation of prices at the production level, so as not to interfere with the play of market forces. For this reason, the turnover tax is now imposed as a rule at the retail level on sales for final consumption; consequently, industrial raw materials and capital goods are not normally subject to the turnover tax in the new system. A few items like foodstuffs, heating fuel, electricity and newspapers are exempt. 58. The new turnover tax essentially consists of two parts; a federal retail sales tax and republican and communal sales taxes. The federal retail sales tax is enforced on most taxable items at the general rate of 12%. Higher rates are applied to a number of products such as, in particular, motor cars, spirits and liquid fuels. The law provides for the possibility of differentiating tax rates by groups of products as a means of regulating supply and demand to meet the requirements of price policy. Republics receive 20% of the revenue from the federal turnover tax collected in their respective territories. Republican and communal retail sales taxes are imposed, at a combined rate of not over 6%. 59. Income from employment is subject to a proportional federal tax of 2.5% and to proportional republican and communal taxes, whose rates are currently limited by the federal government, averaging 8% combined. Taxes on income from employment account for about 75% of government revenues from the taxation of personal incomes. In addition to these proportional taxes, incomes of more than 20,000 dinars are subject to a communal progressive surtax. The number of households reaching this level of income is extremely limited. 60. Taxes on personal income from agriculture in the private sector account for somewhat less than 20% of revenue from personal income taxation. Income from agriculture is estimated on the basis of cadastral surveys which are revised from time to time. No systematic revision of these income data has been undertaken following the general rise in agricultural prices in 1964 and 1965. The income is subject to a proportional federal tax and to proportional or progressive taxes levied by local governments. The yield of these taxes is estimated to have gone down as proportion of the real (as opposed to cadastral) income of farmers from 9% in 1963 to 7% in 1964 and 6% in 1965. Taxes on personal income from other activities (essentially of craftsmen and artisans) only account for about 5% of revenue derived from the taxation of personal income. - 20 - 61. Customs duties are expected to yield, in the new fiscal system, about 12% of consolidated budget revenues and about 22% of federal revenue. Customs duties have primarily a protective function. This protection is nil on raw materials, moderate on semi-finished products, and higher on finished products manufactured in Yugoslavia or whose production is contemplated for the future. In connection with the economic reform, the average customs protection is reduced from 21% to 10.5%. 62. A feature of the new fiscal system is the absence of taxation on the income of enterprises, an item which accounted for as much as 17% of total government revenue in 1961. Prior to 1964 the income of economic enterprises was, as a rule, subject to a federal tax of 15%; in addition, the income of enterprises above a certain level was subject to an extra profits tax. Fiscal measures adopted in that year abolished the profits tax, and exempted a number of industries from the income tax. The July 1965 reform abolished the income tax on enterprises in the sectors where it was still applied. 63. As a rule, the federal and local governments do not float public loans, although they may do so in exceptional circumstances; such was the case when a public loan was issued for the reconstruction of Skopje. Similarly, a loan was issued in 1964 to provide additional resources for the financing of investments by the Federation. 64. Although enterprises are not now subject to any major tax on their income, they remain liable to an important quasi-fiscal con- tribution in the form of interest on their own fixed assets, as distinct from their borrowings. This amounts to an annual levy on capital assets. The rate was reduced in July 1965 frcn 6 to 4%. However, the reduction in the general rate was accompanied by the elimination of most exemptions or levies at favorable rates, so that the average incidence is expected to go up from 2.7% to 2.9%. Its importance may be appreciated from the fact that it yielded Din. 2.28 billion in 1965, or about 15% of combined revenues of all budgets. This constitutes the main source of the federal fund for financing investments; it is not included in the budget. Expenditures 65. Important modifications have been introduced on the expenditure side also, generally to reduce government intervention in the economy, either through current payments or in the form of investment outlays. - 21 - Table 9. Expenditures of Federal and Local Governments; Main Items: 1964-1966 (in billion dinars) 19642/ 1965 19662/ Federal Local Total Federal Local Total Federal Total Expenditures 6.9 6.9 13.8 7.3 8.1 15.4 7.9 of which: Defense 3.3 - 3.3 4.2 - 4.2 5.1 Administration 0.4 1.8 2.2 0.5 2.2 2.7 0.5 Education - 2.5 2.5 - 3.3 3.3 - Subsidies to economy 2.1 0.2 2.3 1.4 0.4 1.8 1.0 Non-economic investments 0.1 0.3 0.4 - 0.9 0.9 - 1/ Original data adjusted to conform, to the extent possible, to new presen- tation adopted in 1965. 2/ Local budget estimates for 1966 not available. 66. Defense represents by far the largest item of expenditures of the Federal Government, accounting for 60% of federal expenditures in 1965 and 1966, and for 27% of total expenditures in 1965. The rise in defense expenditures in 1965 and 1966 over 1964 levels largely reflects increases in salaries of military personnel, to compensate for price rise. Adminis- tration and education expenditures are largely made at the level of regional and local governments. Increased expenditures under these items also reflect rises in salaries. Subsidies to the economy underwent a signifi- cant reduction from Din. 2.3 billion in 1964 to Din. 1.8 billion in 1965. Available data for 1966 only relate to expenditures of the Federal Govern- ment, and indicate a further contraction of subsidies. In recent years, subsidies to the economy were essentially granted for export premiums (about one-third of subsidies in 1963 and 1964), agriculture, railways, electric power and housing. Export premiums were abolished with the devaluation of the dinar. It is contemplated that subsidies to railways and to electric power will also be liquidated at an early date, leaving agriculture as the only major sector receiving subsidies, in the form of guaranteed prices and rebates for fertilizers. 67. Non-economic investments refer essentially to the construction of administrative buildings, schools, etc. A considerable part of these outlays is made by regional and local governments. Within the framework of the Economic Reform of 1965, very strict measures were adopted for a - 22 - drastic limitation of these expenditures. The construction of new administrative buildings is disallowed. The expansion of non-economic investments in 1965 essentially reflects a new presentation of budget receipts and expenditures that was introduced in that year. 68. The role of government in the financing of investments has been greatly reduced in the past three years. The only major government investment fund is now the extra-budgetary fund for the financing of investments. Its main source of new funds is the interest on fixed assets of enterprises, which is expected to yield Din. 2.6 billion in 1966. It is contemplated that about one-half of the proceeds will be transferred to the fund for the development of less developed areas. Another Din. 500 million will be used in grants for investment, essentially for the con- struction of roads and railways. The balance will finance loans to various sectors of the economy, such as power and iron and steel. A substantial amount of grants and loans are channeled through the Yugoslav Investment Bank. Overall Fiscal Position 69. If expenditures for 1964 are computed according to the presen- tation adopted for subsequent years, the nominal increase in expenditures for 1965 is about 7% for the federal budget and nearly 12% for combined accounts. Allowing for the increase in prices, there was a significant contraction in real tems of goverment expenditures. The position for 1966 is similar. 70. Both the federal budget and consolidated budget accounts have usually been close to balance in recent years, with the exception of 1962. According to preliminary returns, the federal budget had a deficit of Din. 280 million in 1965 (about 4% of revenues) compared with a surplus of Din. h20 million in 1964; combined budgetary accounts were virtually balanced, showing a deficit of less than 1% of total revenues. The federal budget for 1966 is expected to be balanced with receipts and expenditures amounting to Din. 7.9 billion. The authorities appear to be determined that this balance shall be obtained. Receipts are so far flowing in according to anticipations. Should they lag behind later on for any reason, the government, in order to maintain a balanced budget, would rather cut down expenditures in the last months of 1966 than increase tax rates. Planned expenditures of the federal budget for 1966 show a 7% increase in nominal terms which, again, amounts to a decrease in real terms. 71. The tax changes have effected a simplification of the tax system. The question may be asked whether the elimination of all taxes n the income of enterprises is compatible with an optimum allocation of resources, especially in view of the high level of profits that may be prevailing in certain industries. The Yugoslav authorities, at this stage, have favored the alternative of leaving economic enterprises with enlarged financial resources. As prices of raw materials and other costs - 23 - have risen following the reform, some compensation was also deemed desirable in the form of a reduction in taxes. The development of the banking system is likely to be facilitated if economic enterprises have large amounts of funds at their disposal to be able to take part in banks as founders, and to turn over resources to them in the form of time deposits. 72. This is altogether in line with the spirit of the Economic Reform, which seeks to continue the policy of decentralization, and reduce further the government's role in economic activity, with a correspondingly increased responsibility for enterprises in investment decisions. As for the levy on fixed assets, it should be pointed out that the Federal Government intends to lower the rate when assets are revalued, probably in the course of 1966. The Yugoslav authorities indicated that they also contemplated further reductions subsequently. 73. Together with the investment cantribution, the total receipts of governments form currently about one-quarter of the social product. The proportion is fairly high even if one were to take national product on a conventional basis. What is of significance is the attempt made in the last two or three years to reduce the proportion from earlier levels. On the whole, this trend is consolidated by the Economic Reform, which has further limited the role of fiscal policy. Total expenditures of all governments are planned to expand less rapidly than the national income; the role of the government as investor has been reduced; and the fiscal system has been devised so as to exert relatively little influence on the formation of producers' prices. This neutral character of fiscal policy is pronounced at the present time when most retail transactions liable to the federal turnover tax are taxable at a uniform general rate. However, the law does provide for the possi- bility of differentiating tax rates by groups of products for price policy action. In a broader sense, one should also mention the stated intention of the Yugoslav Government to use fiscal instruments, along with instruments of credit policy, in case of any serious inflationary pressures. An increase in turnover tax rates, on a selective or general basis, would provide an effective means to curb any undue expansion of demand. - 24 - CHAPTER 4. MONEY AND CREDIT The Banking System 74. Since the introduction of workers' self-management in the early 1950's and with the gradual decentralization of economic decision making over the past fifteen years, the banking structure has been evolving gradually, and has now assumed antincreasingly important role in the economy. 75. In the earlier years, there was one bank - the National Bank - acting as the central bank and providing short-term credits while invest- ment resources were collected through government budgets and allocated without repayment obligation. In 1954 "social investment funds" were set up at commune, district, republican and federal levels, and a new system of financing capital development through credits was introduced. At the same time, economic enterprises began to build up from retained earnings their own investment resources. In 1955, communal banks were created to administer the funds, including the investment funds, of the communal governments, while the National Bank continued to provide the bulk of short-term credit. Subsequently, three specialized banks were established at the Federal level - the Foreign Trade Bank, the Yugoslav Investment Bank and the Agricultural Bank. 76. A new banking and credit law was passed in 1961, a basic feature of which was to transfer the short-term credit function to the communal banks under the overall direction of the National Bank. In the following year a new layer of banks was interposed at the republican level to act as intermediaries between the National Bank and the communal banks and also to function as the investment banks of the republics. Under the law of 1961, all banks could in principle give both long-term (investment) and short-term credits but in practice these two functions tended to be- come separated with short-term credits being provided primarily by the communal banks, while longer-term credits were provided by the specialized federal and republican banks, though the communal banks continued to be the channel for distribution of communal social investment funds. 77. After a year, the National Bank, findiig that by working through the republican banks it had lost contact with the communal banks which made it more difficult to assess the credit needs of the economy, resumed direct relations with the communal banks in regulating the overall quantity of short-term credit. Otherwise, the banking structure remained broadly unchanged until the reform embodied in the banking laws of March 1965. The gradual process of reducing the role of government in investment decisions continued, however. Though the resources of the social investment funds at different levels were channelled through the banks, political entities con- tinued to play a decisive role in the selection of investment projects and in determining the terms of credits. As a step towards reducing the role of government, the General Investment Fund (at the federal level) was * 25 - abolished at the end of 1963 and its resources divided between the three federal specialized banks (a small part went also to the National Bank). The republics, districts and communes were also authorized to proceed in a similar way with their social investment funds; in their case the process of transfer was slower but was virtually completed by the end of 1965. 78. The next step was the reorganization of banks with the banking legislation of March 1965. The new legislation covers all banking insti- tutions - investment banks, commercial banks and saving banks. The management of a banking institution now rests with the enterprises, other organizOions, and governmental bodies which invest in the credit fund of a bank, The investors (shareholders) are entitled to interest on their capital investment, the rate depending on the results of a bank's opera- tions, and also assume risk of losses. No single shareholder can have more than 10% of the total votes in a bank's assembly, irrespective of the size of capital investment, and where two or more political entities are subscribers to one bank, their joint votes may not be more than 20% of the total. 79. Apart from the National Bank which is the central bank, there are three categories of banks: a) investment banks whose primary function is medium and long-term lending; b) commercial banks whose primary function is short-term lending; and c) savings banks accepting deposits from and lending to the general public. A commercial bank may grant investment credits, but only out of resources committed for the purpose; capital of the bank, time deposits of one year, foreign credits, investment credits obtained from banks and other sources. Accordingly, a commercial bank has two distinct departments - one for short-term business and the other for investment business. 80. An important change is the removal of the geographical limitation on banks. Under the old law banks could operate only within the area of the political entity establishing them. Today any bank may conduct opera- tions throughout Yugoslavia. A reason for this change was the desire to increase the mobility of funds. It will also provide a competitive stimulus to the banks because enterprises are free to do business with any bank. Within the framework of the new law, the former communal banks, numbering about 220, have been reorganized and merged into about 100 commercial banks, while the former republican banks have been re-constituted as investment banks. While the functions of the three specialized banks at the federal level are little changed, they have also been re-constituted in accordance with the new law with economic enterprises forming a majority among the founders. As of now, among the commercial banks, 68 do not as a rule grant investment credit, while 32 banks, with larger capital, extend in- vestment credits also, though their main business is commercial banking. There are 10 investment banks proper. 1/ The credit fund is made up of capital invested and a part of the annual income of the bank that is placed in the fund. - 26 - Short-term Credits 81. The National Bank has shed all its commercial. banking functions since 1961. As the central bank, it is the bank of ique, banker to the federal government, manager of foreign payments and controller of short- term credit; it has no responsibility for regulating the total of invest- ment credits. Under the Yugoslav system, an attempt is made to distin- guish sharply between short-term and longer-term lending. Short-term credits may be given only on the basis of sight deposits and of credits from the National Bank, and for purposes and under the conditions set by the Federal Assembly. Investment credits can be granted only on the basis of the capital of the banks, time deposits, and other longer-term resources. 82. The present system of short-term credit regulation was intro- duced in 1963. Until then, there had been some use of short-term bank credit to finance fixed investments, and as a result a substantial portion of short-term credits became frozen. The authorities then defined the conditions under which short-term credits could be given and for what purposes. In the case of enterprises, short-term credits may be given for commodity turnover, for seasonal stocks and for specified purposes, such as the increase in agricultural production or exports. Short-term credits may be given also to political entities but only to offset fluctuations in revenues through the year, and consumer credits may be given to the general public as well as credits in support of small private businesses in the tourist and other trades. 83. Within this framework, the National Bank aims to control the overall quantity of credit by widening or narrowing the purposes for which credits can be given or by easing or hardening the terms of credits. The Bank has the authority, as an exceptional measure, to set credit ceilings but has not considered this necessary so far. Provided that a commercial bank observes all regulations governing its own lending operations, it is eligible to secure credit from the National Bank. Mainly because commer- cial banking is not yet well developed and partly reflecting the past geographical restrictions on the banks, National Bank credit has in recent years financed about 50%'of total short-term lending. 84. In the control of credit a complicating factor in Yugoslavia is the system of restricted deposits. These are large, totalling Din. 1.6 billion at the end of 1965 compared with sight deposits of Din. 2.0 billion. Restricted deposits are accumulated by enterprises and govern- ments under various regulations, for example as statutory reserve funds of enterprises or under regulations requiring that a portion of the funds needed for an investment project should be held in reserve until the investment is completed. Such a regulation, made by the Federal Assembly, is issued or withdrawn as a means of restricting or stimulating overall demand, but the effect of regulations made at different times and hence the net movement of restricted deposits in any period is difficult to foresee. The National Bank has no direct control over these movements, - 27 - though it must take them into account in assessing the credit needs of the economy. The significance of movements in restricted deposits is indicated in the table below: Table 10. Factors Affecting Money Supply (billion dinars) 1963 1964 1965 Increase in short-term credit 4.27 3.42 3.47 Movement in restricted deposits 0.92 1.41 -0.49 Balance of foreign payments -0.21 -0.81 -1.14 Increase in money supply 4.98 4.02 1.811 The change in restricted deposits in 1965 (which represented a net addition to the total outstanding as compared with net decreases in 1963 and 1964) reflected a tightening of the regulations early in 1965. 85. The increase in money supply in 1965 was less than half that of the previous year amounting to 7.2% as compared with 30% and 18.7% in 1963 and 1964, respectively. An even smaller increase in money supply in 1965 is shown in revised money supply figures prepared by the National Bank; these show increases of 13% and 0.4% in 1964 and 1965, respectively. Given a rise of 26% in social product in 1965 at current prices, and of 3% in real terms, the changes in money supply in 1965 underscore the determined effort of the-authorities to counter the prevailing inflationary pressures in the economy. 86. Short-term credit policy was characterized by a rather restric- tive approach in lending to economic enterprises in the early 1960's fol- lowing large balance of payments deficits in 1960 and 1961. With the slowing of the growth of output in 1962 and the emergence of excess capacity, the authorities decided on a more liberal policy in 1963 which continued into 1964. In particular, consumer credit and credits to com- merce expanded rapidly, and, with a faster growth of output, imports rose sharply so that, notwithstanding the continued expansion of exports and earnings from invisibles, the adverse balance on current account exceeded $200 million in 1964. Before the end of that year it became clear that the rate of economic expansion could not be sustained. The National Bank started to restrain increases in credit in the second half of 1964. In particular, consumer credits were restricted by increasing the size of down payments and shortening repayment periods, more restrictive criteria were applied to inventory financing and to ordinary commercial credits and the banks' variable reserve requirement was raised from 20% to 30% of total sight deposits. Credit policy was further tightened in the early months of 1965, notably by limiting commercial credits to 50% of the value of a transaction and by imposing stricter conditions on credits to finance seasonal stocks and imports and exports. Consumer credit regulations were further tightened, and an absolute upper limit was set - 28 - to credits extended to each borrower. Finally, the banks' reserve requirement was again raised, to the legal maximum of 35%. 87. The movements of short-term credits over the past three years are shown in Table 11. Table 11. Bank Credit, 1963-1965 (billion dinars) End of period: 1963 1964 1965 Short-term credit 30.65 34.07 37.54 Credit for working capital 18.86 21.55 24.38 Credit to Federal government 6.05 6.69 7.37 Credit to other governments .61 .51 .17 Consumer credit 3.16 4.24 3.94 Other 1.97 1.08 1.68 At the time of the standby agreement with the I.M.F. in July, 1965, the Yugoslav authorities fixed a limit on the amount of the increase in total bank credit over the period to February 1966, when a limit was set for the balance of the period of the standby agreement. The limit provides for an increase in short-term credit of 16% over the level of December 196., or an annual rate of increase of 10% as compared with increases of 16% and 11% in 1963 and 1964, respectively. In assessing the credit expansion allowed in relation to that in earlier years, the price increases of, on average, from 20% to 30% introduced in August 1965, have to be borne in mind. The objective of monetary policy is to keep the rate of increase in money supply below the rate of increase in economic activity. On the basis of the available data, it would appear that this objective has been achieved since mid-1965 and, while the authorities do not yet feel certain that, following the Reform, all inflationary pressures have been brought fully under control, they are ready to take whatever further steps may be necessary to achieve the objective in 1966. Investment Credits 88. The social investment funds, referred to above, have been the principal source of investible resources over the past decade. Retained earnings of economic organizations have financed on average about 30% of fixed investments during the period. Approximately one-fifth of social investment fund resources have been made available on a grant basis for investments in basic infrastructure (e.g. railways and highways) and the balance as credits. With the continuing role of government in the selection of investment projects, the banks as channels for the resources of the funds provided mainly a service function. Nevertheless, since 1963 when the banks actively began to seek time deposits, they have built up their own investment resources, in the use of which they have had a large measure - 29 - of discretion. The abolition of the social investment fund@ and the resulting transfer of resources to the banks has substantially increased bank resources, though in the case of the Federal investment fund, the resources are kept in special accounts with the specialized banks and do not become part of these banks' own credit funds. The latter will, however, be considerably augmented by the capital contributions of subscribers to the banks under the new banking legislation and with the accumulation of addi- tional funds through the collection of time deposits. At present it is difficult to foresee precisely the future pattern of investment financing as a result of the reductions in taxation of enterprises, the abolition of social investment funds and the reorganization of the banks, but it is clear that the share of financing provided by government at all levels will be significantly reduced. The changing pattern of investment lending by banks and social investment funds is shown in Table 12. Table 12. Investment Credits of Banks and Social Investment Funds 1962 - 1965 (billion dinars) 1962 1963 1964 1965 From: Banks To enterprises For fixed assets - 1.11 3.27 4.77 For working capital 0.38 1.08 1.61 2.hl To others - 0.23 0.95 0.84 Total 0.38 2.42 5.83 8.02 From: Social Investment Funds For fixed assets 6.09 6.22 4.79 3.40 For working capital 0.88 0.56 0.36 0.07 Total 6.97 6.78 5.15 3.47 89. The Yugoslav Investment Bank, utilizing its own and government funds, has been the principal source of investment grants and credits in recent years, providing almost a half of all such grants and credits. The Yugoslav Agricultural Bank has lent for investment in agriculture and allied industries, while the Yugoslav Foreign Trade Bank has lent for investments in export industries (other than agriculture) and in financing medium-term export credits. 90. Interest rates charged by the Investment Bank were not changed as part of the Economic Reform - the general rate of interest on investment credits continues to be 7%, while concessionary rates are provided to some sectors (e.g. electric power 2%, iron and steel 5%). When the credits are given through other banks, the general rate is 6-1/2%. In recent years, - 30 - however, the duration of credits has been shortened. For example, whereas in the early 1960's loans for thermal and hydro power plants were for 30 to 50 years, respectively, the duration was reduced to 20 years and 35 years in 1964, and the latest loans for thermal plans were for 15 years. Such changes in the maturity of loans have had a greater impact on the demand for capital than moderate changes in interest rates would have had, but with the reorganization of the banking system and the expected increase in the mobility of funds, interest rate changes are expected to assume greater importance both in mobilizing financial resources and in allocating these resources between competing uses. - 31 - CHAPTER 5. THE EXTERNAL SECTOR Exports 91. Exports of goods quadrupled in the ten-year period 1955-65, corresponding to an annual expansion of 14.5%.. The structure of exports and their distribution by areas of destination are shown in summary form in Tables 13 and 14. Table 13. Structure of Exports, 1964 and 1965 (in millions of dollars) 1964 % of total 1965 % of total exports exports Total Exports 893 100.0 1,091 100.0 Foodstuffs, beverages and tobacco 262 29.3 280 25.7 Raw materials and fuels 130 14.6 121 11.1 Chemicals 38 4.3 59 5.4 Manufactured goods 310 34.7 374 34.3 Machinery and equipment 152 17.0 257 23.6 Others 1 0.1 - 0.0 Table 14. Exports by Areas of Destination, 1964 and 1965 (in millions of dollars) 1964 % of total 1965 % of total exports exports All Exports 893 100.0 1,091 100.0 Convertible currency areas 498 55.8 541 49.6 of which, Western Europe 388 43.4 403 36.9 US and Canada 53 5.9 64 5.9 Bilateral partners 395 44.2 551 50.5 of which, Soviet bloc 308 34.5 457 41.9 92. Agricultural exports have accounted for about 30% of total exports in recent years, forestry contributing another 5%. In addition to livestock and meat, which, with $166 million in 1965, is Yugoslavia's largest export item, agricultural exports include principally tobacco, fruit and vegetables, and maize. A striking development has been the rapid and considerable expansion of exports of industrial products, which, in the last ten years went up from 40 to 65% of total exports, corresponding in absolute figures to a sevenfold expansion from about $100 million in - 32 - 1955 to almost $700 million in 1965. Within this broad group, machinery and transportation equipment have recorded a phenomenal expansion, from less than $10 million in the early 1950's to more than $250 million in 1965. Electrical machinery is a well-developed line, which accounted for some $60 million in 1965. Ships, from 10,000 to 35,000 tons, represent another sizeable item accounting for $80 million in 1965, though part of this reflected some bunching of exports in that year. 93. Western Europe has purchased each year from 40 to 50% of total Yugoslav exports, Italy and the Federal German Republic being the largest markets. Exports to North America, though increasing, do not account for more than 5 or 6% pf total exports. Another important feature of the distribution of expbrts by areas of destination was the resumption of trade relations with Eastern European countries in 1954 and the sub- sequent expansion of exports to that area to about one-third of total exports by 1960. This proportion was maintained from 1960 to 1964, but rose in 1965 to 42% of total exports, the main markets being the Soviet Union, Czechoslovakia and Poland. Exports to less developed areas, consisting largely of machinery and equipment, have also expanded sub- stantially. 94. Yugoslav exports have been assisted in recent years by the granting of export credits. The total of such outstanding credits at the end of 1965 was approximately $180 million, an increase of $50 millien over end 1964. About one-half of exports of the engineering industry benefited from export credit arrangements in recent years; all exports of ships involved some such financing. 95. Exports recorded a considerable rise of 23% in 1965; preliminary data indicate that the expansion has continued at a very high rate in the first quarter of 1966. Table 15. Exports by Quarter 1965, and First Quarter 1966 Change over same period ($ million) of previous year (%) 1965 I 224 9.3 II 256 20.8 III 272 28.3 IV 338 27.7 1966 I 266 18.7 The acceleration of exports since the middle of last year suggests that the devaluation of July 1965 and related measures contributed significantly to the surge forward of exports. This is confirmed by the fact that exports to convertible currency areas, which had con- tracted by 6% in the first half of 1965 as compared with the same period of 196k, expanded by 15% in the second half of the year. - 33 - 96. According to the Yugoslav authorities, the increase in exports to Eastern European countries was largely due to favorable market con- ditions enjoyed by Yugoslav exports on East European markets for such items as textiles, leather goods and canned foods. Imports 97. On the whole, imports expanded less rapidly than exports, increasing to somewhat less than three-fold over the decade 1955-65, which corresponds to an average rate of expansion of 11% as against 15% for exports. The movement of imports has been more irregular than that of exports. Table 16. Imports by main categories: 1965 ($ million) % of Total All imports 1,288 100.0 Foodstuffs, beverages and tobacco 190 14.8 Fuels 72 5.6 Raw materials 217 16.8 Chemicals 119 9.2 Manufactures 322 25.0 Machinery and transport equipment 355 27.6 Others 13 1.0 Table 17. Imports by areas of origin: 1965 ($ million) % of Total All imports 1,288 100.0 Convertible areas 812 63.0 of which, Western Europe 504 39.1 US and Canada 195 15.1 Bilateral partners 476 37.0 of which, EastecnEuropean 369 28.0 countries 98. The main item of agricultural imports is wheat, largely from the United States under the provisions of P.L. 480. In line with Yugoslavia's industrial development, imports of fuel and raw materials have expanded considerably. Imports of machinery have fluctuated between $300 and $400 million since 1960, a level about twice as high as that which prevailed in the late 1950's, and have been consistently higher than exports in this category. - 34 - 99. Regarding the distribution of imports by area of origin, a feature, in contrast with the pattern of exports, is the volume of imports from the United States, which is Yugoslavia's largest supplier, with close to 15% of all imports in 1965. In Western Europe the main suppliers are Italy and the Federal German Republic. As a proportion of total imports, imports from Eastern European countries have represented a smaller percentage of trade than corresponding transactions on the export side. 100. Most imports are subject either to restrictive licensing or to restrictive foreign exchange allocation. A device, introduced in 1964, is the tying of imports with exports, under which the amount of foreign exchange made available to industrial firms active in export trade is varied according to the export performance of an enterprise. The authorities seem to be aware that such an expedient can only be adopted for a limited period. Enterprises are also allowed to import capital goods and spare parts in specified proportions of their accumu- lated depreciation on machinery and equipment. 101. The considerable expansion of imports in 1964, followed by a stationary level in 1965 calls for comment. The relatively large rise in imports in 1963 was in part attributable to the fact that there was no rise in 1962. In 1964 there was even a larger expansion. Apart from the overvaluation of currency, the other important factors were: greater utilization of capacity in industry; the accelerated levels of domestic investment activity during 1963 and 1964 and the emergence in these years of a generally inflationary situation in the economy. Further, given the structure of domestic industry and the raw material supplies position, it has been the country's experience that whenever industrial output has expanded by well over 10 or 12%, this has been reflected in a particu- larly large expansion of imports for industry. Table 18. Imports by Quarter, 1964, 1965 and First Quarter 1966 Change over same period ($ million) of previous year () 1964 I 310 + 33.6 II 349 + 18.3 III 362 + 37.1 IV 301 + 13.3 1965 I 272 - 13.3 II 349 - III 342 - 5.2 IV 324 + 7.6 1966 I 369 + 35.7 f 35 - 102. It is not certain whether the contraction of imports in 1965 has led to a difficult stocks position currently. No precise data are available. According to the Yugoslav authorities, stocks were somewhat lower than normal in certain sectors, but were adequate in most of the economy, taking into account the large rise in imports in 1964 and as the level of industrial activity was relatively low in 1965. In parti- cular branches like textile industry, stocks of materials seem to be quite adequate. There has been a considerable expansion of imports (by over 35%) in the first quarter of 1966. Sizeable imports of wheat are a factor contributing to this rise. 103. It would also seem that relatively large foreign exchange allocations were made to enterprises at the beginning of the year to enable them to increase their stocks to provide for an anticipated higher level of economic activity in 1966 than in 1965. In the second place, the proportion of export proceeds that can be used by exporting firms was substantially raised, and now ranges from 7 to 70%, depending on the type of activity of the enterprise, the highest percentage being applicable to enterprises representing foreign firms. Altogether, the amount of export proceeds that can be freely used in this way by exporters is estimated at $300 million in 1966 or about 25% of total exports. Third, the amounts of imports of capital goods that enterprises are allowed to make in specified proportions of their depreciation funds have been significatnly increased; these proportions were approximately doubled and now range from 5 to 30% of the total accumulated depreciation at the end of the previous year. While allowing for the special factors, and even if some imports should level off, it would appear that the expansion of imports for the year as a whole will be more than the planned 11%. 104. It was anticipated that total exports in 1966 would rise by about 1116; exports to East Europe by 4% and those to convertible currency areas by 14%. The movements of total exports and imports, and in trade with convertible currency areas, in the initial months of 1966, as com- pared with the corresponding period of 1965, are interesting and may have some significance to the development of trade with these areas. Table 19. Trade with Convertible Currency Areas: (in $ million) Jan.-Feb. 1965 Jan.-Feb. 1966 increase % Total exports 141 166 18 Exports to convertible currency areas 70 101 43 Total imports 178 247 39 Imports from convertible currency areas 107 154 44 - 36 - Services 105. Services have been increasingly important in the balance of payments of Yugoslavia: gross receipts went up from $136 million in 1960 to $381 million in 1965, or about one-third of exports of merchandise. Net receipts were $177 million in 1965. "Freight", which has accounted for between 40 and 60%..f gross receipts on services in recent years, corresponds to the transportation of goods on Yugoslav ships, and includes transit transportation on inland waterways. The potentially most signicant services item is "travel". The combined (gross) receipts from tourism - i.e. the expenses of foreign tourists in the country, and transportation expenses of foreign tourists on Yugoslav carriers outside Yugoslavia - are shown below for the period 1955-1965: Table 2Q. Foreign Tourist Receipts, 1955-1965 (in millions of dollars) 1955 9.6 1960 21.6 1961 28.3 1962 42.3 1963 68.2 1964 88.8 1965 105.0 About 90% of foreign tourists in 1965 came from convertible currency countries, the largest national groups being West Germans, Austrians, Italians and French. The expansion of foreign tourist receipts has been encouraged recently by two factors: the opening of the Adriatic Highway, and the abolition of visas with a number of countries. Balance on Current Account 106. Yugoslavia's balance of payments on current account is shown below in summary form: Table 21. Balance of Payments, Current Account, 1960-65 (in millions of dollars) Services and Balance on Trade Private Donations Current Account 1960 -270 + 98 -172 1961 -348 + 97 -251 1962 -201 +133 - 68 1963 -280 +195 - 85 1964 -438 +224 -214 1965 1/ -203 +242 + 39 1/ Preliminary. - 37 - 107. The net balance on services and private donations has contributed to reduce, to an increasing extent, the deficit on current account. In 1965, a year of slightly reduced imports and high exports, the trade deficit was for the first time more than compensated for by a surplus of $242 million under services and private donations, yielding an estimated surplus on current account of $39 million. Even if all services transactions had been settled in convertible currencies, the balance of payments on current account with convertible currency areas would still have given rise in 1965 to a deficit of some $30 million. Development Plan 1966-70 and Foreign Trade 108. A basic idea of the economic reform incorporated in the 1966-70 Plan framework is to increase the country's participation in the inter- national division of labor as a means to consolidate economic development. Reflecting its commitment to eliminate barriers to the free exchange of commodities other than tariffs, Yugoslavia, which had been an associate member of the GATT since 1959, obtained full membership in the Agreement in August 1966. 109. According to the draft five-year plan, exports of goods and services are expected to increase over the period 1966-70 at an annual rate of 13 to 15%, as compared to an annual rate of growth in gross social product of 7.5 to 8.5%. Exports of merchandise are expected to increase over the period at an annual rate of some 11.5%; the annual rate of expan- sion would be 9.4% for agricultural exports and 120 for industrial exports. Exports would, accordingly, go up from 12% of gross social product in 1965 to some 14% in 1970. The annual growth rate in "services" receipts is placed as high as 19%. Within the broad category of industrial exports, exports of engineering industry are expected to expand vigorously. Table 22. Exports in 1965 and 1970 - Selected Items (in millions of dollars) 1965 1970 Maize 3 70 Meat, fresh and preserved 149 178 Fish 10 18 Wood 41 55 Wood furniture 27 59 Wood pulp 5 34 Polyvinyl raw materials 7 14 Textile fabrics 23 31 Clothes 25 67 Lead and zinc 20 37 Ferro-alloys 6 15 Rolled and drawn copper 23 35 Rolled and drawn aluminum 18 26 Manufactured steel products 19 28 Machinery and equipment 191 354 Ships 79 100 Source: Federal Planning Office; the data for 1970 are illustrative. - 38 - 110. Expansion of agricultural exports is expected to be concentrated in three main groups of products: maize, meat, and fruits and vegetables. It was pointed out that the value shown in the table for exports of maize in 1970 ($40 million) was a rather conservative estimate. Actual marketing possibilities, particularly in Western Europe, are considered to be good due to the large maize deficiency in that area, the low level of protection extended to Common Market farmers on this item, and the possibility for Yugoslavia to supply that market several weeks ahead of North American ex- porters. The projected expansion of meat exports also seems reasonable in view of the considerable demand in Western Europe; the total estimate would, in fact, represent a significant decrease in exports of pork and a large increase in exports of beef from $75 million to some $130 million. However, the prospects for exports of fruits and vegetables may not be particularly favorable because of competition from other suppliers in the Mediterranean area, and deficiencies in storage, refrigeration and trans- portation facilities in Yugoslavia. 111. A considerable proportion of the planned increase in exports is expected to originate in manufactured steel products and in capital goods. Depending on the type of machinery, exports are planned to grow at rates ranging from 12 to 18% annually, the highest rate being in electrical machinery. In this category, Yugoslavia has attained a fairly high level of exports; further growth at such high rates is likely to prove very difficult in this highly competitive field, especially if a program of modernization and specialization of industry were not successfully and rapidly implemented. The prospects in regard to ships are similar. 112. Regarding the direction of international trade in the period covered by the Plan, the Yugoslav authorities estimate that exports would broadly be: to convertible areas, 50%; to Eastern European countries, 35%; and to other countries, 15%. Within the convertible area, Western Europe will continue to occupy a predominant position. 113. During 1966-1970, imports of goods and services are anticipated to expand at an annual rate of 10 to 12%. This is somewhat less than the rate of expansion in exports, but significantly larger than the growth rate in gross social product. - 39 - Table 23. Imports in 1965 and 1970: Selected Items (in millions of dollars) 1965 1970 Wheat 86 - Fertilizers 21 17 Natural phosphates 7 20 Cotton 64 77 Wool 24 44 Cellulose fibers 4 12 Synthetic fibers 6 36 Coke and coal 32 43 Crude petroleum 17 58 Cement 5 11 Tin 5 8 Copper 16 24 Pharmaceutical products 7 12 Source: Federal Planning Office; data for 1970 are illustrative. 114. Self-sufficiency in wheat is to be achieved by 1970. Practi- cally all imports of wheat, which have fluctuated between $50 and $100 million in recent years, are supplied by the United States, which now requires payment in dollars. Import requirements of fertilizers will decrease, while fertilizer use is expected to double. The increase in imports of cottop, wool, cellulose and synthetic fibers clearly reflects the anticipated development of the textile industry, bth for largely incrpased domestic consumption and for exports. Imports of machinery will go up with modernization and greater specialization of Yugoslav industry. For some years the share of domestic industry in the required plant equipment is unlikely to rise, especially as exports of machinery and parts also are expected to increase considerably. Details are not available for these categories. 115. It is anticipated that over the five-year period covered by the Plan, foreign exchange receipts from tourism will increase from $105 million to about $400 million, corresponding to an average annual increase of over 30%. The anticipated continued rise of income in Western Europe will enlarge tourism, and a relatively new country in this field, richly endowed by nature, is likely to be a beneficiary. The prospects are undoubtedly good. However, it is doubtful if such a large increase in foreign exchange earnings will accrue from this source in the next few years. It may be noted that there was only a small increase in net earnings from tourism in 1965. 116. The Yugoslav Government attaches considerable importance to achieving equilibrium in its balance of payments on current account, both in global terms and with convertible currency areas, in the period - 40 - covered by the plan. This has only been achieved once in the postwar period, namely in 1965, a year in which imports were rather low and exports were particularly high. Obtaining equilibrium on current account every year consequently implies a significant change in the pattern of exports, imports and services along the lines envisaged by the develop- ment plan. With regard to 1966, it would appear that both exports and imports will be greater than originally projected. The Yugoslav authori- ties were confident at the beginning of April that a balance on current account transactions would materialize for the year as a whole. 117. For the longer term, while the Plan projections are optimistic, the successful implementation of reforms undertaken with a view to greater participation of the Yugoslav economy in world markets on a competitive basis, the extent to which modernization of industry will actually be carried out and the scope of cooperation agreements with foreign firms, will largely determine the prospects, and it is difficult to be precise about the future evolution of the different items of balance of payments on current account. External Debt 118. There was an increase in short-term indebtedness (under one year largely) from 1960 to 1964: bank credits went up from $106 million to $269 million while commercial credits went up from $56 million to $107 million. The combined total of short-tem indebtedness has remained approximately unchanged from the end of 1964 to the end of 1965. The Yugoslav authorities intend to continue this policy of limiting short-term indebtedness to the end-1964 level in 1966 also, although these credits may seasonally expand for brief periods of time. 119. The evolution of Yugoslavia's medium and long-term external debt is summarized in the following table for the period since 195$. (Details of the debt outstanding as of June 30, 1965 are shown in the Statistical Appendix, Table 34.) In addition, Yugoslavia has incurred Table 24. Medium and Long-Term External Debt Repayable in Foreign Currencies, 1955-65 (in millions of dollars) Outstanding, Outstanding, Including net of End of: Committed Disbursed Repaid Undisbursed Undisbursed 195 315 281 - 315 281 1960 776 608 223 553 385 1963 1,514 1,150 378 1,136 772 1964 1,847 1,350 497 1,350 853 1965 2,625 1,700 613 2,012 1,087 Source: Yugoslav National Bank. debt payable in dinars, which amounted to the equivalent of $537 million at the end of 1965. This portion of Yugoslavia's external debt was incurred in its entirety with the United States. 120. The increase in debt was particularly large in 1965: amounts outstanding, including the undisbursed portion of the debt, expanded in that year by $662 million. To the extent of $324 million the increase was incurred with bilateral partners, particularly the Soviet Union, so that the increase in debt payable in convertible currencies was $338 million, of which $161 million is repayable in U.S. dollars. This latter amount included a substantial proportion of P.L. 480 credits which financed the purchase of U.S. agricultural surpluses by Yugoslavia. 121. Due to the high proportion of medium-term loans in total indebtedness, amortization payments in foreign currencies on debt incurred by end of 1965 are heavy in the next few years, amounting to an average of some $230 million in 1966-68 and tapering off gradually in the following years. (See Statistical Appendix, Table 35.) Both repayments and interest are mostly in convertible currencies, as the debt is very largely in these currencies. Including interest charges, the service of external debt payments in foreign currencies is estimated to absorb an average of $280 million in 1966-68, or more than 201 of total external currency receipts at their 196- level, debt service obligations in convertible currencies amounting to more than 35% of receipts in such currencies. These propor- tions will of course vary in the future, with the further external credits that may be obtained, rearrangements that are made in respect of existing debt, and the level of foreign exchange earnings from exports and services. 122. As may be seen from Table 33 of the Statistical Appendix, there was a striking deterioration in debt terms after 1962 with regard to the length of the credit; 60% of all official loans and credits received by Yugoslavia in 1962 had a maturity of more than 10 years while this propor- tion was nil in 1963, 17% in 1964 and 24% in 1965. A certain improvement was registered with regard to the rate of interest, the bulk of the credits being made available at 5 to 6%. 123. By mid-April 1966, debt consolidation arrangements made by Yugoslavia with individual creditor countries involved total repayments of $68.5 million; with Canada $8.2 million, with Italy $5.0 million, with Netherlands $3.6 million, and with the United States $11.7 million. In addition, an arrangement with Austria provides in principle for the deferment of liabilities amounting to $1.7 million. An agreement with the Federal German Republic provides for the deferment for two years of the repayment of a $26.2 million credit granted in 1961 and due for repay- ment in 1966. In this case, however, the original credit agreement provided for the possible deferment of this obligation for a period of five years. 124. The immediate relief provided by debt consolidation agreements has also been supplemented by new credits, mainly a 5-year credit for $23 million by France for the purchase of raw materials and durable consumer goods, and an $80 million standby arrangement with the I.M.F. in support of the economic reform. An agreement was also signed with the Soviet Union concerning the repayment of a foreign exchange loan of $30 million through the clearing account instead of in foreign exchange. At the same time, the maturity dates were deferred. 125. Altogether, the financial assistance that has become available to Yugoslavia after the economic reform may be estimated at $230 million; this assistance is essentially of a short-term nature, as may be seen from the summary presentation below. (It is assumed in this presentation that the drawings on the I.M.F. would be repurchased after three years, and that the French credits would be made available in their entire amount in 1966. The arrangement with the Soviet Union, on which little information is available, is not taken into account.) Except for Italy, the creditor Table 25. Effect of Debt Conversion and Other Assistance on Repayments Due (in millions of dollars) 1965 - 50.4 1966 -119.4 1967 - 6.9 1968 + 91.3 1969 + 45. later years + 40.3 Source: Yugoslav National Bank. countries have not included in the consolidation arrangements the post- ponement of any liabilities falling due after 1966, and the main part of the deferment is only to 1968, and 1969. In some cases, the newly granted credits were made at higher rates of interest than the credits which were being consolidated. Foreign Exchange Reserves 126. The following table records the variations in reserves of gold and foreign exchange in recent years: Table 26. Gold and Foreign Exchange Reserves (in millions of dollars) End of: Total National Bank 1960 21 13 1961 41 33 1962 80 72 1963 99 98 1964 83 74 1965 109 104 February 1966 84 71 May 1966 -- 77 Sources: Yugoslav National Bank; IFS. There was some accumulation of balances in clearing accounts during 1965, from the equivalent of $27 million at the end of 1964 to $63 million at the end of 1965. These are being drawn upon during 1966 and the expected level by the year-end is about $40 million. 127. Reserves are expected to increase by $100 million in 1966. This projection assumes a small surplus on current account, and an inflow of external credits of about the same magnitude as last year. It is the policy of the authorities to set aside the entire proceeds from debt postponement arrangements, and to avoid diverting them to the payment of current imports. Looking ahead further, by the end of the 1966-70 Plan period, hopefully, the authorities anticipate an increase in reserves of some $400 million, and then to a degree of convertibility of the dinar. CHAPTER 6. GROWTH PROSPECTS AND CREDITWORTHINESS Development Plan 1966-70 128. The objectives and instruments of the 1966-70 Development Plan - like those of the economic reform - have been discussed widely in the country for over two years. The Federal Bureau of Economic Planning has organized a number of studies on trends in the economy, possibilities in particular sectors and the longer term perspective of development - both within itself and outside, in universities, professional bodies and business associations. The development pro- gram has recently been approved by the Federal Assembly. The following paragraphs are based on a provisional draft of the Plan. 129. The previous practice of presenting annual plans within a medium-term plan framework has been dropped and there is no social plan for 1966. There is to be a mid-term review in 1968. The 1966- 70 plan is intended only to provide the broad policy approach. On the whole, planning in Yugoslavia is becoming increasingly indicative, with reliance on more general means of regulation through budgetary and credit measures, although there will be intervention by the Federal Government in particular branches like petro-cheinical industry, power development, and also for the development of less developed regions of the country. 130. The social product is expected to rise at an annual rate of 7.5 - 8.5% during 1966-70. The emphasis in plan formulation is on stability and integrating the economy into the world economy, rather than on any particular growth rate. Thus, the authorities would not be unduly concerned even if actual growth rates were to fall short. Taking the 8.5 % growth target, the sectoral growth targets are indicated below, in comparison with the rates attained during 1961-64. The growth rates postulated for 1966 are: 6% in the aggregate; 7% in industry and 4-5% in agriculture. As 1966 is recognized to be a tran- sitional year, a year of adjustment and difficulty, it is realized that these rates set the maximum and that actuals may be lower. Alongside of the overall growth of the economy, the purposes of the Plan broadly are: improvement in living standards; the accelerated development of less developed areas; correction of certain structural imbalances in pro- ductive apparatus such as lag in electric power generation and in development of non-ferrous metal industry for which there are requisite natural resources; considerable development of technology and labor skills so as to raise productivity levels; and a reduction in the share of government agencies in investment financing to about 30% of total. - 145 - Table 27. Social Product by Economic Branches : total economy Average annual rates of growth; constant prices 1961-67 1966-701/ Industry and mining 11.3 9.9 Agriculture 1.9 5.5 Forestry 5.4 6.8 Construction 13.3 7.1 Transport 6.9 9.5 Trade and catering 11.1 9.5 Arts and crafts 6.6 13.0 Total economy 8.6 8.5 Per capita 7.4 7.3 1/ These rates are the upper limits. Table 28. Selected output targets 1965 1970 Electric energy (billion KWH) 15.5 30.5 Coal (million tons) 30.0 41.5 Aluminum (000 tons) 41.0 100.0 Copper (000 tons) 56.0 80.0 Cement (million tons) 3.0 4.1 Steel (million tons) 1.8 3.2 (1964-1965) average Total cereals (million tons) 11.2 13.9 Vegetables and fruit (million tons) 4.2 5.6 Meat (million tons) 0.7 1.0 131. The share of agriculture in social product is expected to decline from 27.5% in 1965 to 24%a in 1970, and that of industry to rise from 35% to 37%. The increase in employment is expected to be 2.5 - 3.0f0 a year, absorbing the rise in active population and also enabling some limited further shift in population from agriculture to non-agricultural occupations. Considerable emphasis is to be placed on raising the technical level of labor force, as the chief factor for raising pro- ductivity, in line with the general approach towards modernization of industry. Of total employees in industry, those with university and secondary education and those who are skilled together formed an estimated 40.3% in 1963; this proportion is to rise to 53.4%f by 1970. - 46 - 132. As for the scale and pattern of investment, the ratio of investment to national product is to be lower than in recent years and the rate of growth of investment will be less than that of national product. Rate of growth in total investment during 1966-70 is placed at 5.5 - 6.5% a year, as against an observed growth rate of 12.7% during 1961-64. Working capital needs are to be provided for to a greater extent than before, and fixed assets formation less. Given these invest- ment trends, and if the growth rate of the economy should work out to be 8% or more, there would be scme improvement in capital-output ratio. This, is, however, uncertain, as the rate of growth may be lower. Table 29. Percentage share of Gross Investments in Fixed and Working Assets in Social Product 1961-64 1966-70 Total Economy Gross economic investments in fixed assets 23.6 17.9 Investments in working assets 6.4 10.1 Gross economic investments - total 30.0 28.0 Non-economic investments 12.6 9.9 Total investments in fixed and working assets 42.6 37.9 Social Economy Gross economic investments in fixed assets 29.5 21.7 Investments in working assets 7.5 11.8 Gross economic investments - total 37.0 33.5 Non-economic investments 13.3 9.5 Total investments in fixed and working assets 50.3 43.0 133. In fixed investments (economic), which are mostly in the social sector - private investment being small and mainly in agriculture - the combined share of industry, mining and electricity is to be reduced from 54.5% in 1961-65 to 50.7% in 1966-70, while the share of agriculture is to rise from 13.3% to 14.7%. Total investments in the agricultural sector, taking into account private farm investments as well as invest- ments in fertilizer industry and other fields like secondary roads which are of significance for agriculture, are, in fact, larger still: this combined total is roughly estimated at Din. 21.7 billion for the period 1966-70, or 15.3% of estimated total of fixed investments in the economy (private and social; economic and non-economic together). Within industry itself, greater attention is to be given to development of energy, ferti- lizers and non-ferrous metals; of the total for industry, two-thirds is to be devoted to modernization and expansion of existing units. - 47 - Table 30. Investments in Fixed Assets during 1961-65 and 1966-70 (at comparable prices : in billions of dinars) 1961-65 1966-70 A. Gross Investments in Fixed Assets : Total Economic : Social 67.7 90.2 Private n.a. 2.2 Non-Economic : Social 31.9 39.8 Private n.a. 11.6 Total n.a. 143.8 B. Gross Investments in Fixed Assets: Economic, in Social Sector Industry (including electricity) 35.8 45.7 Agriculture 8.7 13.3 Forestry 1.1 1.6 Construction 2.0 2.6 Transport 13.9 17.3 Trade and catering 5.2 8.2 Arts and crafts 1.0 1.5 Total 67.7 90.2 Appraisal 134. Since the end of 1965, domestic demand conditions have been effectively regulated, and the necessary fiscal and credit restraint has been enforced. The restraint of domestic demand in 1965 is reflected in the fact that, while total domestic product increased by only 3%, exports could rise by as much as 22%, even while imports declined by 3,. Nor would it appear that stocks of imported raw materials and parts are run down inordinately. As brought out in Chapter 4, while the credit measures are somewhat complicated, and may be expected to become more general as the banking system evolves, the expansion of credit has been kept down. There is a reduction in public consumption, and private incomes in real terms have risen less than the national product. In the initial months of 1966 there are no disquieting trends in money supply and incomes. The monetary authorities continue to be watchful and are prepared to pursue the necessary fiscal and credit policies so as to enable early import liberalization as well as market determination of domestic prices. 135. The crucial role of credit policy and credit mechanism cannot be overemphasized. As decentralization becomes increasingly a reality, as the role of government declines and that of enterprises increases in the allocation of resources and investment decision-making, and as the reliance of the economy on market criteria improves, the prcblem of - 48 - coordination arises - how a decentralized system can in general adhere to the broad guidelines of the Plan and in what manner a firm incomes policy can be implemented to provide effective guidance to economic enterprises. In this, the banking system would have an important role, under the direction of the National Bank. Increasing use of the interest rate mechanism and the gradual development of a capital market are envisaged by the authorities in this context, though no sudden or spectacular developments are to be expected. In the fiscal field, the emphasis in tax and other changes since 1963 has been on leaving larger resources with the economic organizations; the attempt has been to attain a budgetary balance at lower levels of receipts and outlays. At the same time, the reform of the turnover tax, which now is levied virtually wholly at the retail-end, provides an important fiscal lever that can be effectively operated upon if the need should arise. 136. Import liberalization is closely related to modernization of industry, and is essential to the effective implementation of the eccnomic reforms. Then only would domestic producers be truly exposed to world market conditions. It is fully appreciated by the authorities that import liberalization cannot be long delayed if the gains to export trade from devaluation and the domestic measures taken in the field of credit policy are to be consolidated and if the economy is to be subject to the rigors of competitive efficiency. While import liberalization is desirable, and even essential for the success of economic reforms and for the longer-term development of the economy on a competitive basis, the low level of reserves renders it difficult to undertake it. With reserves that are hardly equivalent to one month's imports, the reluctance to liberalize imports to a major extent is understandable, especially when the domestic economic situation itself still remains somewhat uncertain due to the legacy of administrative direction of the economy for a number of years, and with the rather wide fluctu- ations in agricultural output that may necessitate sizeable wheat imports in particular years. 137. The external debt position of the country has been reviewed in detail in Chapter 5. Briefly, outstanding debt (medium- and long- term) repayable in convertible currencies as of December, 1965 was equivalent to $1.72 billion, including the undisbursed amount. Repayments due on this debt average $192 million a year during the five years 1966-1970; interest payments average $47 million a year. This debt servicing may also be viewed in relation to the likely con- vertible currency earnings of the country from exports and invisibles averaging about $950 million a year in the next five years. The large external debt burden that the country faces is obvious. Arrangements concluded so far to reschedule the repayments falling due immediately in 1966 are not particularly encouraging, in that only partial relief is provided for; further, some of the arrangements are of a particu- larly short-term nature, adding to the burden in 1968 and 1969. In view of the severity of the debt problem facing the country, and keeping in - 49 - mind the growth record of the country and the longer-term growth prospects, Yugoslavia's main creditor countries should explore possibilities of more satisfactory debt rearrangements. If, for example, the main part of the obligations falling due in the next five years could be deferred for 5-10 years, the country could utilize its own resources more confidently for import liberalization and industrial modernization. 138. The debt servicing problem has arisen in part because of reliance on short- and medium-term suppliers' credits in recent years. In order to expand, Yugoslavia was forced to borrow abroad, and because long-term loans were not available, recourse was had to short- and medium-term suppliers' credits. Except where an investment clearly justifies recourse to such credits on the basis of ability to service the debt in terms of foreign exchange, and until the existing debt problem becomes manageable, the Yugoslav authorities have affirmed their intention to exercise great restraint in incurring such new debts. In the external debt situation that Yugoslavia faces, the firm implementation of this policy, with the necessary coordination and regulation through the National Bank, is of vital importance. 139. The Economic Reform has certain objectives of major consequence. While the economy has been moving away from centralization for quite some years, the reform proclaims this trend as the policy of the country, and the Development Plan for 1966-70 incorporates this objective. The several measures taken by the authorities so far in the fiscal, credit and other fields show how serious-minded they are in implementing the reforms. Over the years, Yugoslavia has been pragmatic and experimental in its approach to economic development; the manner in which economic reforms are being implemented indicates flexibility and receptivity in regard to policy measures. The Developwent Plan for 1966-70 has growth targets no higher than the actual growth attained during 1961-65, incorporates desirable changes in investment allocations, and in any case stresses the need for consolidation and stability. 140. Yugoslavia's balance of payments position improved markedly in 1965 and this improvement is expected to be maintained in 1966 and after. Exports have risen in recent years at a rate of 10-12%: a remarkable feature of the Yugoslav economy has been the sustained growth of exports from $150 million in 1950 to $565 million in 1960 and $1090 million in 1965; and of imports from $300 million in 1950 to $825 million in 1960 and $1255 million in 1965. There is a clear recognition of the crucial importance of furthering exports and the required re-organization of domestic agriculture and industry for the purpose. A major effort is under way to enlarge earnings from tourism for which prospects are good. Thus, growth prospects in general terms as well as of exports, are good. 141. In the 1966-70 plan years, Yugoslavia would need further external assistance. Taking into account the possibilities of export growth, import requirements, likely further improvement in net invisibles - 50 - position, debt repayments falling due, and also minimum reserve require- ments, gross capital requirements of Yugoslavia may be placed at about $250 million a year during 1966-70. This could be provided in debt rearrangements to the extent possible, finance for import requirements of industrial modernization and for specific projects. On the basis of performance so far, growth prospects, and the flexible policy approach of the authorities, Yugoslavia continues to be creditworthy for Bank financing. STATISTICAL APPENDIX Table No. Production and Prices 1 Gross Material Social Product and National Income (at current prices) 2 Gross Material Social Product and National Income (at constant prices) 3 Expenditure of Gross Material Social Product 4 Expenditure on Investments in Fixed Assets of the Socialized Sector, by Sectors (at current prices) 5 Gross Social Investments in Fixed Assets: Social Economy (at constant prices) 6 Expenditures on Investment in Fixed Assets of the Socialized Sector, by Sources of Financing 7 Employmant in the Social Sector by Major Industry Group,1960 and 1965 8 Producers Prices (1960 = 100) 9 Cost of Living (1960 = 100) 10 Production of Major Agricultural Commodities 11 Indices of Agricultural Production (1960 = 100) 12 Index of Industrial Production (1958 = 100) 13 Industrial Production by Sectors (1960 = 100) 14 Survey of Basic Transport Capacities 15 Transport Investments and their Financing 1961-1970 16 Electric Power Generation and Consumption Government Revenues and Expenditures 17 Consolidated Revenues of Federal and Local Budgets 1961-1964 18 Consolidated Expenditures of Federal and Local Budgets 1961-1964 19 Consolidated Revenues of Federal and Local Budgets 1964-1966 (New Presentation) 20 Conslidated Expenditures of Federal and Local Budgets 1964-1966 (New Presentation) -2- Table No. Money and Credit 21 Balance Sheet of the National Bank of Yugoslavia 22 Consolidated Balance Sheet of all Banks 23 Short-term Credits to Enterprises for Working Assets 24 bney Supply According to the New Definition Foreign Trade and Payments 25 Balance of Payments 26 Exports and Imports, by Commodity Group 27 Exports of Major Commodities 1961-1965 28 Imports of Major Commodities 1961-1965 29 Exports by Areas and Major Countries of Destination 30 Imports by Areas and Major Countries of Origin 31 Receipts and Payments for Services 1960-1965 External Debt 32 Short Term External Debt 1960-1965 33 Schedule of Conditions of Official Credits made available to Yugoslavia in the Period 1962-1965 34 External Medium- and Long-term Public Debt Outstanding Including Undisbursed as of June 30, 1965 35 Estimated Contractual Service Payments on External Medium- and Long-term Public Debt Outstanding Including Undisbursed as of June 30, 1965. Table 1: GROSS MATERIAL SOCIAL PRODUCT AND NATIONAL INCOME (At current prices in billions of dinars) 1953 1957 1958 1959 1960 1961 1962 1963 1964 1965 Gross Social Product 11.34 19.91 19.89 24.46 28.87 33.65 37.73 45.80 60.92 75.31 Economy - Total 'ining & Kzanufacturing 4.81 8.01 8.84 10.50 12.69 14.24 15.45 18.55 24.75 27.74 Agriculture 3.21 6.27 5.35 6.86 7.04 8.38 9.84 11.88 15.58 20.61 Forestry 0.15 0.30 0.24 0.29 0.38 0.37 0.59 0.69 0.91 1.13 Construction 0.81 0.96 1.15 1.47 1.87 2.61 2.73 3.48 4.85 5.47 Transport 0.81 1.57 1.27 1.55 2.13 2.52 3.00 3.80 4.75 5.60 Commerce, Hotel & Catering, Tourism 0.81 1.85 1.98 2.50 3.18 3.57 3.97 4.97 6.83 10.36 Handicrafts 0.51 0.95 1.06 1.29 1.58 1.84 1.96 2.20 2.89 ) 4.37 Other - - - - 0.13 0.18 0.25 0.37 ) National Income 10.23 18.29 18.34 25.69 26.86 31.10 34.71 41.99 55.83 Economy - Total Industry 4.30 7.27 8.05 9.62 11.70 13.00 13.98 16.68 22.38 Agriculture 3.10 6.04 5.14 6.59 6.71 7.91 9.29 11.21 14.74 Forestry 0.12 0.29 0.23 0.27 0.37 0.31 0.48 0.60 0.74 Construction 0.74 0.89 1.07 1.38 1.77 2.48 2.59 3.30 4.60 Transport 0.47 1.10 0.93 1.17 1.70 2.04 2.45 3.06 3.62 Commerce, Hotel & Catering, Tourism 0.77 1.79 1.91 2.42 3.08 3.46 3.84 4.79 6.58 Handicrafts 0.49 0.91 1.02 1.24 1.53 1.78 1.91 2.14 2.82 Other - - - - - 0.12 0.16 0.22 0.34 I/ The national product jnd income ejtimates are not compnrable Aith those in thc West; they exclude government admini6tration and many services rendered to consumers, transoortation included and housing not included. Both gross social product and national income data are at rarket prices. Source: ug;6sl1-avija 1945-1964; 1965 data are provisional and was furnished by Yugoslav iuthorities to the Nission Table 2: GROSS NuTIIJ SOCIAL PRODUCT AND Ni,TIONj--L INCOMEI (At constant prices of 1960, in billions of dinars) 1953 1957 1958 1959 .1960 1961 1962 1963 1964 Gross Sociai,roduct 16.14 22.57 23.28 27.10 28.82 30.44 31.75 35.61 40.21 Econo*dy - TotdI Mining &ranufacturing 5.29 8.88 9.93 11.09 12.60 13.48 14.47 16.73 19.41 Agricuilfure '5&50 6.86 6.05 7.94 7.03 6.89 6.93 7.39 7.93 Forestry 0.40 0,43 0.44 0.47 0.49 0.149 0.53 0.58 0.57 ,Construction 1,30 1.18 1.27 1.46 1.77 2.15 2.19 2.56 2.96 Trahqport 0.99 1.49 1.64 1,84 2.18 2.28 2.40 2.58 2.78 Commerce, -Hotel & Caterinf,, Tourism l107 2.31 2.47 2.78 _3.18 3.46 3.58 4,08 4.66 Handicrafts 1409 1.42 1.48 1.52 1.57 1.69 1.65 1.69 1.89 Other - - - - -- - - - - National Income 15.11 21.04 21.68 25.25 26.83 28.31 29.50 33.10 37.39 Economy.. Total Industry 4487 8W17 9.14 10.21 11.62 12.42 13.32 15.40 17.90 Agriculture 5.24 6034 5.77 7.57 471 6.58 6.61 7.05 7.57 Forestry 0.38 0441 0.43 0.45 .47 0.47 0.51 0.55 0.55 Construction 1.25 1.12 1.19 1.38 1,68 2.03 2.06 2.42 2.79 Transport 0.80 1.20 1.32 1.48 1.75 1.83 1.93 2.08 2.24 Commerce, Ilotel & Catering, Tourism 1.52 2.24 2.40 2.70 3.08 3.35 3.47 3.96 4.51 iandicrafts 1.05 1.36 1,43 1.46 1.52 1.63 1.60 1.64 1.83 Other - -- l/ The national product and income estimates are 66i coparable with those in the Uest; they exclude government administration and many seryices,rendered to consumers. Transportation included; housing not included. Both gross Social Prqdhct and Inational income data are at market prices. Source: Jugoslavija 1945-1964 Table 3: EXPENDITURE OF GROSS 1ATERIAL SOCIAL PRODUCT (At current prices, in billions of dinars) 1960 1961 1962 1963 196h TOTAL 28.87 33.65 37.73 h5.8o 60.92 Personal consumption 1h.92 17.55 19.50 23.05 29.60 Collective consumption 1/ 3.81 h.56 5.00 5.ho 6.33 Gross investments in Fixed assets 9.36 11.66 13.33 15.85 20.38 Exports less imports of commodities and services 2/ -0.57 -0.80 -o.25 -0.88 -1.77 Difference 3/ 1.35 0.68 o.15 2.38 6.38 1/ Collective consumption does not include only material expenditure of budget and institutions, but also subsidies and grants to the economy. 2/ Shown at the official rate and after 1963 in settlement exchange rate. 3/ Residual item, and includes movements in stocks. Source: Jugoslavija 19h5-1964. Table h: EXPENDITURE ON INVESTMENTS IN FIXED ASSETS OF THE SOCIALIZED SECTOR, BY SECTORS (In billions of dinars, at current prices) 1960 1961 1962 1963 196h 1965 Ifanufacturing and mining 3.10 h.09 h.73 5.52 6.71 6.94 Agriculture 1.07 1.07 1.19 1.42 1.71 1.58 Forestry 0.12 0.12 0.19 0.18 0.21 0.22 Construction 0.21 0.27 0.32 0.36 0.46 0.32 Transportation 1.55 1.69 1.63 1.70 2.43 2.23 Trade and catering 0.45 0.52 0.57 0.85 1.16 0.99 Handicrafts 0.12 0.13 0.114 0.17 0.20 0.18 TOTAL 6.61 7.89 8.76 10.19 12.87 12.4h Housing and communal development 1.32 1.69 1.98 2.67 3.95 1.64 Cultural and social institutions 0.54 0.74 0.89 1.00 1.24 1.28 Government 0.33 0.15 0.68 0.78 0.77 0.74 TOTAL 2.19 2.89 3.55 b.45 5.95 6.66 GRAND TOTAL 8.80 10.78 12.31 14.64 18.83 19.10 Source: Statisticki bilten : various issues. Table 5: GROSS SOCIAL INVESTMNTS IN FIXED ASSETS: - SOCIAL ECONOMY - (in 1962 prices, in billions of dinars) 1960 1961 1962 1963 1964 1965 Total Investments 10.38 11.30 12.31 14.19 16.70 15.05 Economic Investments 7.59 8.03 8.38 9.56 11.60 10.1h Industry and Nining 3.62 h.20 h.48 5.20 6.07 5.51 Agriculture 1.30 1.11 1.19 1.35 1.53 1.20 Forestry 0.13 0.12 0.18 0.17 0.19 0.17 Construction 0.22 0.27 0.26 0.31 0.3 0.28 Transport 1.70 1.69 1.59 1.60 2.18 1.91 Trade and catering 0.50 0.51 0.60 0.78 1.02 0.91 Arts and Crafts 0.13 0.13 0.13 0.15 0.17 0.16 Non-economic investments 2.79 3.27 3.92 h.63 5.10 4.91 Standard of Living 2.40 2.79 3.42 3.96 4.43 h.42 - public utilities 1.77 1.99 2.49 3.00 3.34 3.39 - cultural and social activities 0.63 0.80 0.93 0.96 1.09 1.03 Government and social authorities and services 0.39 0.48 0.50 0.70 0.67 0.49 (indices in relation to previous year) Total investments - 108.8 108.9 115.3 117.7 90.1 Economic investments - 105.8 104.4 11.0 121.4 87.4 Non-economic investments - 117.0 120.0 118.0 110.2 96.3 Data furnished to the Hission by Yugoslav authorities Table 6: EXPENDITURES ON INVESTNENT IN FIXED ASSETS OF THE SOCIALIZED SECTOR, BY SOURCES OF FINANCING (At current prices, in billions of dinars) 1960 1961 1962 1963 1964 1965 Total investment 8.80 10.77 12.31 1464. 18.83 19.10 Financed by: Federal Government 3.27 3.95 3.75 3.92 1.28 0.65 Special resources 2.95 3.73 .37 1.8 079 Budget 0.32 0.29 0.20 0.17 0.20 0.16 Republics 0.62 0.80 1.11 1.46 1.56 0.71 Social funds 0.47 -.-r -.T 1.39 1.37 -.7- Housing funds 0.07 0.08 0.13 0.14 0.18 0.22 Budget 0.09 0.09 0.04 0.03 0.02 0.07 Distric and Communes 1.54 1.90 2.49 2.88 4.03 3.75 Social funds 0.-7 0.77 1.21 2.01 1.01 Housing funds 0.78 0.93 1.19 1.30 1.87 2.53 Budget 0.92 0.12 0.10 0.12 0.15 0.21 Economic organizations 2.72 3.18 3.65 4.08 4.89 5.51 Other social organizations 0.56 0.85 0.94 0.98 1.17 1.48 Banks 0.85 0.92 0.34 1.33 5.90 7.01 Source: Statisticki bilten: various issues. Table 7 EIJPLOYIENT IN THE SOCIAL SECTOR BY RAJOR INDUSTRY GROUP, 1966 AND 1965 (in -000's of persons) 1960 % 1965 % :anufacturing and mining 1072 36.0 1377 38.4 Agriculture and Fishing 271 9.1 313 8.7 Forestry 83 2.8 87 2.4 Constriction 316 10.5 331 9.2 Communication 196 6.5 251 7.0 Trade and Tourism 249 8.3 348 9.6 Handicraft 231 7.7 215 6.0 Housing 73 2.4 68 1.9 Cultural-Social 306 10.0 b10 11.4 Social and State 185 6.7 183 5.4 TOTAL 2972 100.0 3583 100.0 Source: Jugoslavija 1945 - 1964; Indeks, April, 1966 Table 8: PRODUCERS PRICES (1960 = 100) Year All items Investment Raw Consumers goods materials goods 1954 91 96 87 96 1955 96 98 93 100 1956 97 99 95 100 1957 97 101 94 99 1958 98 99 96 99 1959 98 99 97 99 1961 104 101 106 101 1962 104 102 105 103 1963 105 101 105 105 1964 110 103 110 111 1965 127 110 127 130 Source: Federal Statistical Office. Table 9- COST OF LIVIENG (1960 = 100) All Food Tobacco & Clothes & Rent Fuel and Furn- Health Re- Transport items beverages footwear Lighting ishings creation and FTT 1954 69 69 67 89 32 54 98 77 76 73 1955 77 82 74 95 35 58 100 U1 79 82 1956 83 88 82 96 37 61 103 84 84 83 1957 86 90 88 97 38 66 100 85 82 86 1958 90 92 97 101 44 70 99 94 97 92 1959 91 93 103 100 46 76 98 95 99 97 1960 100 100 100 100 100 100 100 100 100 100 1961 108 110 111 103 103 107 106 115 121 108 1962 119 126 127 109 108 110 109 126 126 114 1963 126 138 127 111 115 112 109 134 130 1111 1964 141 160 145 117 123 134 113 149 134 124 1965 190 223 183 145 159 207 136 198 188 14R Source: Federal Statistical Office Table 10 PRODUCTION OF IMAJOR AGRICULTURAL CqIMODITIES (Thousand metric tons) Comodity 1930-39 1952 1953 195k 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 Cereals Wheat 2430 1680 2510 1380 2430 1600 3100 2450 4130 3570 3170 3510 4140 3700 3460 Maize 4300 1470 3840 3000 3900 3370 5660 3950 6670 6160 4550 5270 5380 6960 5920 Oats 310 216 352 233 278 324 484 259 404 373 132 305 345 293 337 Rye 212 225 309 191 263 205 280 211 265 233 191 169 156 175 156 Barley 410 258 458 253 390 3k4 60k 470 575 529 571 475 524 53k 682 Fibers Hemp 250 120 220 272 342 220 312 262 2k1 201 255 278 256 292 306 Flax 54 10 18 1k 22 18 22 20 27 22 19 12 13 12 12 Cotton 1 2 3 5 9 6 10 7 9 7 6 6 9 7 6 Other industrial crops Sunflower 9 51 113 125 102 59 93 80 11 98 117 161 231 260 265 Sugar beet 616 512 1510 1250 1380 1130 2030 1480 2k20 2290 1730 1870 2670 2830 2620 Tobacco 15 15 31 32 43 31 63 39 46 31 15 30 5k 66 49 Vegetables Potatoes 1650 1150 2100 1880 2270 2190 3310 2620 2760 3270 2690 2630 3020 2820 2380 Beans 13k 50 150 173 227 168 179 119 226 216 18k 178 205 233 171 Cabbage and 243 207 436 319 460 330 553 39k 56k 628 468 457 523 569 481 Kale Tomatoes 4k 85 15k 151 101 203 278 243 269 271 272 305 293 302 283 Melons 167 119 338 275 265 257 438 276 363 355 2k5 319 k07 47k k20 Fodder Alfafa 372 491 939 925 960 750 8(8 865 1350 1460 1330 1390 1680 1860 1830 Forage beet 468 501 96k 965 800 882 1250 11k0 11k0 1370 1050 950 9k9 1110 945 Source: )tatisticki 0- odisnjak Table 11: INDICES OF AGRICULTURAL PRODUCTION (1960 = 100) 1961 1962 1963 1964 1965 1/ Agriculture, total 97 100 111 117 108 Crop farming 85 90 102 110 100 Cereals 86 93 101 111 101 Industrial crops 80 104 148 161 146 Vegetables 82 83 96 96 82 Fodder 88 79 87 94 92 Fruit growing 268 208 222 193 118 Viticulture 131 154 166 171 153 Stock breeding 99 96 102 110 107 Cattle breeding 105 102 103 105 109 Pig breeding 94 92 105 124 117 Sheep breeding 105 93 90 85 81 Poultry breeding 96 96 108 112 123 Socialist farms 101 123 1-42 164 170 Crop farming 100 115 132 144 145 Cereals 94 106 116 122 125 Industrial crops 94 124 172 207 208 Vegetables 78 90 145 103 74 Fodder 168 177 177 216 213 Fruit growing 157 127 134 195 141 Viticulture 139 164 146 207 237 Stock breeding 119 135 146 181 197 Cattle breeding 115 127 130 149 156 Pig breeding 130 157 174 223 257 Sheep breeding 102 93 96 107 103 Poultry breeding 130 157 252 507 523 Private farms 96 97 106 110 100 Crop farming 82 86 97 104 92 Cereals 84 90 98 109 96 Industrial crops 74 95 138 141 120 Vegetables 82 83 95 96 82 Fodder 77 65 74 78 76 Fruit growing 275 211 225 192 122 Viticulture 131 153 168 166 143 Stock breeding 99 93 98 103 102 Cattle breeding 104 98 98 98 102 Pig breeding 90 86 98 115 104 Sheep breeding 106 93 95 84 90 Poultry breeding 94 95 105 103 114 1/ Preliminary data Source: Statisticki godisnjak Table 12 INDEX OF INDUSTRIAL PRODUCTION (1958 = 100 ) Capital Intermediate Consumers' goods goods goods Total 1959 117 112 115 113 1060 140 126 134 131 1961 146 136 144 140 1962 148 144 160 150 1963 169 165 187 173 1964 202 190 217 201 1965 222 203 236 217 1963 I 146 143 165 150 II 166 167 182 172 III 163 169 184 174 IV 203 177 218 195 1964 I 166 172 196 179 II 208 191 208 201 III 193 191 207 198 IV 236 202 252 222 1965 I 190 194 221 200 II 222 209 228 217 III 204 205 230 212 IV 269 207 267 234 Source: Indeks, No.2, 1966 Table 13 INDUSTRIAL PRODUCTION BY SECTORS (1960 = 100) 1960 1961 1962 1963 1964 1965 Total 100 107 115 132 154 166 Investment goods 100 104 105 121 144 158 Raw materials 100 108 114 131 151 162 Consumer goods 100 108 120 140 162 177 Electricity 100 111 126 152 159 174 Coal 100 103 103 113 121 122 Crude oil 100 128 151 165 188 223 Ferrous metals 100 104 107 111 122 131 Non-ferrous metals 100 110 126 138 142 151 Non-metals 100 109 121 137 167 182 Metal manufacturing 100 105 105 118 149 161 Shipbuilding 100 108 121 150 140 169 Electrical equipment 100 112 126 159 209 219 Chemicals 100 112 125 159 191 232 Building materials 100 108 100 114 131 135 Wood products 100 110 123 138 163 175 Paper 100 123 150 178 219 253 Textiles 100 103 114 132 149 159 Leather and footwear 100 108 113 133 162 171 Rubber 100 107 111 136 168 185 Printing and publishing 100 114 120 129 151 157 Processed food 100 108 115 133 148 158 Tobacco 100 81 69 104 147 158 Source: Federal Statistical Office Table 14 SURVEY OF BASIC TRANSPORT CAPACITIES 1961 1965 Plan 197 Inddx 1965 Index 1970 19TT116 passenger goods pas- goods passenger goods passenger goods pas- goods Branch of capacity capacity senger capa- capacity capa- capacity capacity senger capacity transport (thou- (thou- capa- city (thou- city capa- sands) sand city thou- sands) (thou- city tons) (thousands) sand sand tons tons.) Railway 232.0 1,399.8 246.9 1,494.3 268.5 1,538.2 106.0 107.0 108.8 102.9 transport Sea 28.5 1,241.4 25.2 1,489.3 27.0 1,850.0 87.8 119.8 108.0 124.2 transport River 2.8 402.2 2.2 471.0 2.2 745.0 78.6 117.1 100.0 158.2 transport Air 0.9 - 1.2 - 1.8 - 133.1 - 150.0 - transport Road 102.0 53.6 167.5 106.2 275.0 195.0 164.1 198.5 164.5 183.5 transport Urban 132,8 - 186.0 - 272.8 - 140.1 - 146.8 - transport Source: Bulletin of the Federal Institute for Statistics "Transport and Communications". Table 15: TRANSPORT INVESTMENTS AND THEIR FINANCING 1961-1970 (at constant prices in millions of dinars) Per- Per- 1961-1965 centage 1966-1970 centage share share A. Projects of transport enterprises 9,602 69.1 13,100 75.9 1. Railway transport 3,870 27.8 5,5oo 31.9 2. Sea transport 1,529 11.0 2,310 13.4 3. River transport 334 2.4 370 2.1 4. Air transport 361 2.6 330 1.9 5. Road transport 1,213 8.7 1,840 10.7 6. Road enterprises 209 1.5 320 1.8 7. Urban transport 452 3.3 600 3.5 8. Trans-shipment 627 4.5 600 3*5 9. PTT traffic 1,007 7.3 1,230 7.1 B. Construction and reconstruction of communication lines h,288 30.9 h,200 24.1 1. Railway lines 1,170 8.4 2,091 11.9 2. Roads 3,067 22.1 1,958 11.3 3. Navigable water-ways/rivers 43 0.3 150 0.9 4. Studies 8 0.1 1 - Total Investment /1 13,890 100% 17,300 100% C. Sources of Financing 1. Grants of Federal and other governments h,832 34.8 h,180 24.2 2. Loans of governments through investment banks 1,,60 11.2 1,086 6.3 3. Retained earnings of transport enterprises 5,808 41.8 7,450 43.0 4. Bank credits 1,690 12.2 4,584 26.5 Total Financing 13,890 100% 17,300 1000 /1 Excluding working capital Source: Federal Secretariat for Transport Table 16 ELECTRIC POWER G2MPEERjTION ;dND CONSUMPTION (GIh) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1. Total gross generation 8,962 9,917 11,271 13,536 14,188 15,523 19,800 22,000 25,000 28,700 31,300 (including industrial plants) 2. Integrated power industry: a) Net generation 7,620 8,504 9,780 11,840 11,643 12,932 15,100 17,300 21,500 25,600 27,400 b) Purchasers from industrial 133 74 125 183 193 214 100 - - - enterprises c) Imports less exports -93 --78 -142 -291 341 394 200 - - Total available 7,660 8,500 9,763 11,732 12,177 13,540 15,400 17,300 21,500 25,600 27,400 3. Demand 7,694 8,572 9,840 11,840 13,377 14,300 17,000 19,400 22,300 25,600 27,400 4. Deficit 34 72 77 108 200 760 1,600 2,100 800 - - Source:Statisticki Godisnjak -and other data supplied by the Yugoslav Electric Power Community. Table 17 C-NSOLIDATED REVENUES OF FEDERAL AND LOCAL 3UDGETS 1961-1964 (in millions of dinars) 1961 1962 1963 1964 Total Federal Local Total Federal Local Total Federal Local Total Federal Total Federal turnover tax 2580 2470 110 3040 2910 130 4120 4000 120 4580 4470 110 Communal turnover tax 440 - 440 560 - 560 620 - 620 860 - 860 Taxes on income -)f enterprises 1520 1500 20 920 900 20 h80 W60 80 280 220 60 Taxes on wages 2010 - 2010 2210 - 2210 2270 - 2270 3040 - 3040 Other personal income tax 420 - 420 400 - 400 360 - 360 300 - 300 Communal surtax on personal incomes 380 - 380 400 - 400 380 - 380 430 - 430 Customs duties 1040 1040 - 1300 1300 - 1460 146o - 2250 2250 - Subsidies from other budgets 640 - 640 760 - 760 820 - 820 960 - 960 Other revenue 630 180 450 1020 440 580 1160 630 530 1310 690 620 Total revenues 9660 5190 h70 10610 5550 5060 11670 6530 5140 14010 7630 6380 Less: Subsidies to other budgets 640 310 330 760 390 370 820 440 380 960 510 450 Net revenues 9020 4880 4140 9850 5160 4690 10850 6090 4760 13050 7120 5930 Source: Data submitted by the Yugoslav authorities. Table 1 %JSOLIDATED EXPENDITURES OF FEDERAL AND LOCAL RUD!ETS 1961-1964 (in millions of dinars 1961 1962 1963 1964 Total Federal Local Total Federal Local Total Federal Local Total Federal Local Defense 2390 2930 - 2700 2700 - 2860 2860 - 3320 3320 - hdministration 1380 270 1110 1550 280 1270 1640 310 1330 2010 350 1660 .,ducation and culture 1080 - 1080 1350 - 1350 1310 - 1310 1680 10 1670 Public health and social welfare 400 210 190 480 260 220 490 280 210 550 310 240 Communal services 130 - 130 90 - 90 100 - 100 110 - 110 Subsidies to economy 1540 1530 10 1770 1760 10 1560 1480 80 2130 1950 180 Non-economic investments 300 80 220 270 80 190 260 70 190 330 100 230 Subsidies to extra budgetary funds 650 ho 610 810 30 780 760 30 730 970 60 910 Subsidies to other budgets 640 310 330 760 390 370 820 440 380 960 510 450 Loans and gua- rantee obligations 450 340 110 650 500 150 500 330 170 610 390 220 Budget obli.a- tions and budget reserves 450 150 300 480 140 340 420 130 290 390 130 260 Other expenditures 80 80 - 120 120 - 150 150 - 130 130 - Totale.penditures9T90 -5700 7_090 11030 7270 770 10870 680 7790 13190 -75 93o Less: Subsidies to other budgets 640 310 330 760 390 370 820 )40 380 960 510 650 Net expendituresF80 5090 73760 10270 5870 ~700 l567 TOi 12230 6750 5480 Source: Data submitted by the Yugoslav authorities. Table 19 CNSOLID.TED REVENUES OF FEDERAL AD LOCr.L BUDCTS. 1964 - 1966 (110 PRETXTION ) (in millions of dinars) 1964 1965 2! 1966 2/ Total Federal Local Total Federal Local Total4 Federal Local 4/ Federal turnover tax 4468 4468 - 4051 3701 350 - 4680 - Communal turnover tax 889 50 840 1152 - 1152 - - - Other turnover taxes 241 - 241 271 - 271 - - Taxes on income of enterprises 327 225 102 12 - 12 - - - Taxes on wages 4483 449 4034 4933 929 4005 - 1149 - Taxes on personal income in agriculture 689 56 633 774 112 662 - 141 - Taxes on personal income in crafts and in other activites 202 17 185 283 1 282 - - - Customs duties 2253 2253 1842 1842 1730 - Federal grants to Republics 506 - 506 660 - 660 - - - Other revenues 892 283 609 1838 1109 728 - 977 - Total revenues 15179 7805 7374 16179 7734 8446 8677 Less: Federal grants to Republics 6 506 _ 660 660 22 - Net revenues 1J73 7299 7374 15519 7074 8446 7904 The new presentation,introduced in 1965,calls for the recording of all receipts and expenditures of so6io- political communities while previously a substantial fraction of grants of socio-political communitiesto extra-budgetary funds was made by surrendering a part of revenue before it was accounted in the budget. In addition, grants, to the extent possible, are classified by purposes instead of being simply recorded as usubsidies". Attempt has been made in this and the following table to present revenues.and expenditures in 1964 according to the presentation adopted for subsequent years. J Preliminary )f Planned V Not available Source: Data submitted by the Yugoslav authorities Table 20 0NSOLIDATED EXPENDITURES OF FEDERAL AND LOCAL BUDGETS 196b-1966 (NEW PRESENTATION 1) (in millions of dinars) 1964 1965 2/ 1966 3/ Total Federal Local Total Federal Local TotalL/ Federal Local4/ Defense 3321 3321 - 4195 4183 12 - 5070 - Administration 2132 351 1782 2680 h[3 2237 - 501 - Education and culture 2465 - 2465 32.75 28 3248 - 30 - Public health and social welfare 550 310 240 798 428 370 - 513 - Communal services 111 - 111 287 - 287 - - - - Subsidies to economy 2257 2079 1777 1805 1407 397 - 1030 - Non-economic investmonts 391 102 290 919 50 869 - 53 - Subsidies to autonomous in- stitutions, social organizations and funds of socio-political communities 536 55 481 261 28 233 - 25 - Subsidies t' other funds 905 - 905 135 - 135 - - - Feieral gIrants to Republics 506 506 - 660 660 - - 773 - Loans and ruarantee obligations 607 391 217 465 465 - - - - Budget obligations and budget reserves 390 133 257 435 157 278 - 282 - Other expenditures 139 139 - 168 168 - - 398 - Total expenditures 1716,oh ,15 873777 - =80,677 - Less: Federal grants to Republics 506 506 - 660 660 - - 773 - Net expenditures 13,806 6,881 6,C25 15,424 7,358 8,066 - 7,904 - 1/ The main features of the new presentation are explained in footnote 1 to Table 2/ Preliminary 3/ Planned / ot available. Source: Data submitted by the Yugoslav authorities. Table 21 BALANCE SHEET OF THE NATIONAL BANK OF YUGOSLAVIA (billion dinars) Gold and Credits to customers Claims on other banks Unclas- Total Foreign Years foreign Foreign Total Federal 1/ Total Credits Other sified assets Bank liabi- exchange assets govern- Other claims assets funds lities ment Total lii J iti s 1953 0.08 0.42 7.93 o.85 7.08 - - - 0.08 8.51 0.02 0.90 1954 0.09 0.43 9.71 0.41 9.30 - - - 0.06 10.29 0.02 0.84 1955 0.11 0.55 10.08 1.01 9.07 0.41 0.41 - 0.08 11.23 0.05 0.73 1956 0.13 0.28 6.68 1.44 5.24 2.50 2.50 - 0.06 9.65 0.06 0.34 1957 0.12 0.15 6.93 1.85 5.04 3.13 3.13 - 0.02 10.35 0.04 0.19 1958 0.17 0.17 6.79 1.67 5.12 4.28 4.28 - 0.01 11.42 0.05 0.21 1959 0.13 0.15 7.98 2.25 5.73 5.45 5.45 - 0.03 13.74 0.05 0.25 1960 0.11 0.14 9.60 3.21 6.39 5.48 5.48 - 0.10 15.43 o.06 0.34 1961 0.17 0.25 4.29 3.23 1.06 11.51 11.26 0.25 0.11 16.33 0.07 0.31 1962 0.67 0.50 7.01 6.12 0.89 11.89 11.19 0.70 0.88 20.95 0.08 0,72 1963 0.88 0.35 6.97 6.06 0.91 14.55 14.29 0.26 0.73 23.48 0.08 0.72 1964 0.72 0.25 7.55 6.68 0.91 15.55 15.54 0.01 0.70 24.81 0.09 1.25 1965 1.58 1.12 8.51 7.37 1.14 16.06 16.07 0.01 2.75 30.02 0.10 2.35 Table 21: (Continued) BALANCE SHEET OF THE NPTIONAL BANK OF YIrOSIAVIA (billion dinars) Restricted deposits Sight liabilities Liabilities to other banks federal Uounter- Poreign2/ House- / eieral C1ro- Legal Years Total Gotern- part deposits hold Other Total govern- Other Cur- Total accounts reserve Other ment funds ment rency of other requi- liabi- banks rements lities 1953 4.42 0.02 o.40 0.21 3.79 2.21 0.08 2.13 0.68 0.28 0.02 0.26 1954 5.31 0.12 0.63 0.21 - 4.35 2.81 0.30 2.51 0.88 043 0.03 - 0.40 1955 6.hh 0.56 0.89 0.21 4.78 2.50 0.18 2.32 0.88 0.63 0.29 - 0.34 1956 4.o 0.52 0.92 0.21 - 2.39 2.73 0.21 2.52 0.95 1.53 1.16 - 0.37 1957 4.co 0.ho 1.21 0.18 - 2.21 2.89 0.17 2.72 1.26 1.97 1.23 - 0.74 1958 4.15 0.61 1.16 0.24 - 2.14 2.51 0.21 2.30 1.42 3.08 2.21 - 0.87 1959 4.23 0.33 1.13 0.26 - 2.51 2.95 0.29 2.66 1.76 4.50 2.19 - 2.31 1960 4.29 0.09 0.92 0.39 0.05 2.83 3.91 0.75 3.16 1.93 4.90 3.31 - 1.59 1961 6.69 1.87 1.00 0.37 0.28 3.17 1.83 0.66 1.17 2.46 4.97 1.16 2.05 1.76 1962 7.16 0.71 1.38 1.20 0.55 3.32 2.05 0.85 1.20 2.84 8.10 1.77 3.74 2.59 1963 5.80 0.95 2.09 1.04 0.12 1.60 3.65 1.20 2.45 3,60 9.63 2.21 4.57 2.85 1964 6.02 1.49 1.82 o.81 0.01 1.89 3.18 1.14 2.04 4.60 9.67 2.35 4.45 2.87 1965 6.55 0.81 1.55 2.33 0.01 1.85 3.26 0.24 3.02 5.14 12.62 1.89 5.89 4.84 Table 21: (Continudd) BALANCE SHEET OF THE NATIONAL -ANK OF YUGOSLAVIA 1/Till April 1961, this item included direct credits to all borrowers except Federal Government. In April and May of the same year direct credits were transferred to the communal banks, except the credits extended to social insurance, the extraordinary credits to enterprises and some others. 2/ Including the dinar quotas of Yugoslavia in International financial organisations deposited with the National Bank. 3/ Till April 1961, this item included restricted deposits of all sectors, except those covered by colums 2-5. In April and May of the same year these deposits were transferred to the communal banks, except those deposits which by a special decision were qualified as central deposits. 4/ Till March 1961, this item included sight liabilities to depositors of all sectors, except the Federal Government. In April and May of the same year these liabilities were transferred to the communal banks, except collateral deposits in dinars relating to letters of credit established and guarantees issued etc. Source: Statifticki Bilten No. 2. 1966. Table 22: CONSOLID,%TED RtLICE SHEET OF ALL BANKS (billion dinars) old Total Gold and Foreign Credits Unclass- assets Bank Foreign foreign assets to enter- Govern- for ified Funds liabi- Years exchange Total prises for ment invest- sumer Other2/ assets total lities working borrow- monts credits liabi- assets ings lities 1 2 3 4 5 6 7 8 9 10 11 12 1953 0.08 0.42 7.93 5.50 1.46 0.81 0.09 0.07 0.08 8.51 0.02 0.90 1954 0.09 o.43 9.71 6.98 2.19 0.10 0.18 0.46 0.06 10.29 0.02 0.84 1955 0.11 0.55 10.69 7.70 2.23 0.46 0.22 0.08 0.08 11.43 0.11 0.73 1956 0.15 0.28 10.31 6.62 2.92 0.25 0.37 0.15 o.06 10.80 0.12 C,37 1957 0.14 0.15 12.23 8.20 3.09 0.20 0.59 0.15 0.06 12.58 0.17 0.26 1958 0.21 0.20 13.29 9.12 2.96 0.21 0.58 0.42 0.17 13.87 0.20 0.33 1959 0.16 0.21 15.54 11.29 2.63 0.22 0.80 0.60 0.20 16.11 0.33 0.44 1960 0.13 0.17 18.24 12.65 3.55 0.27 0.96 o.81 0.43 18.97 0.36 0.58 1961 0.20 0.30 20.40 14.63 3.35 0.35 1.35 0.72 0.54 21.44 0.39 0.58 1962 0,80 0.62 26.76 16.43 6.65 0.90 1.76 1.02 1.03 29.21 0.59 1.51 1963 0.98 0.55 33.07 19.94 6.(9 2.15 3.16 0.93 0.78 35.38 0.84 1.83 1964 0.84 0.45 39.90 23.16 7.64 3.60 4.24 1.26 0.91 42.10 1.38 2.40 1965 1.71 1.28 45.56 26.79 8.18 5.01 3.94 1.64 2.83 51.38 2.49 5.24 Table 22 .(Continued) CONSOLIDATE B,L,NCEC 6HEET OF ,.LL BANKS (billion dinars) Restricted deposits Sight liabilities For- Time G Float Cur- Honey Total Ente s Gmer Count d gni R de -Other Total li r- oum Other rency supply prises vern-er part e-prsseishod9+45 menit. funds posit4 opiemnts holds 9+14+1 .1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1953 4.42 0.49 0.67 0.40 0.21 - - 2.65 2.21 1.17 0.74 0.06 0.24 0.28 0.68 3.17 1954 5.31 0.85 0.64 0.63 0.21 - - 2.98 2.81 1.43 0.73 0.09 0.56 0.43 0.88 4.12 1955 6.49 1.16 1.23 0.89 0.21 - - 3.00 2.85 1.46 0.62 0.15 0.62 0.37 0.88 4.10 1956 4.78 1.65 1.60 0.92 0.21 - - 0.40 4.11 2.23 0.98 0.20 0.70 0.47 0.95 5.53 1957 5.22 2.20 1.09 1.20 0.18 - - 0.55 4.98 2.03 1.24 0.32 1.39 0.69 1.26 6.93 1958 6.13 2.28 2.04 1.16 0.24 - - 0.41 5.12 2.31 0.80 0.47 1.54 0.67 1.42 7.21 1959 6.61 2.77 1.94 1.13 0.26 - - 0.51 6.46 2.78 1.10 0.67 1.91 0.51 1.76 8.73 1960 6.98 3.16 1.71 0.92 0.39 0.14 - 0.66 8.02 2.81 1.83 0.90 2.48 1.10 1.93 11.05 1961 8.51 2.90 3.16 1.00 0.37 0.28 - 0.80 8.46 2.86 0.67 1.25 3.68 2.46 1.04 11.96 1962 10.52 4.26 1.81 1.38 1.20 0.24 0.37 1.26 12.61 4.61 1.03 1.55 5.42 1.14 2.84 16.59 1963 11.14 3.42 1.60 2.09 1.03 0.34 1.15 1.51 16.32 5.11 2.22 2.16 6.83 1.65 3.60 21.57 1964 12.73 3.23 1.98 1.82 0.81 0.45 2.74 1.70 19.34 6.02 2.12 2.71 8.49 1.65 4.60 25.59 1965 16.22 4.19 1.31 1.55 2.33 0.62 3.20 3.02 20.27 7.62 0.92 3.05 8.68 2.02 5.14 27.43 Table 22 (Continued) CONSOLIDATED BALANCE 6HEET OF ALL BANKS I/ This item covers credits from the banking resources and from the investment resources of banks. 2/ Including credits for working assets of organizations and institutions of a non-business nature, credits to social insurance and short-term credit facilities to investors. J Since 1964 this item covers time savings deposits and other time deposits. / Since 1964, Treasury bills and issued bonds have been included. 5/ Including funds and reserves of the Yugoslav Insurance Union, interest on bank credits out of social investment funds. / Including giro-accounts of autonomous institutions of a non-business nature, giro-accounts of social organizations, other giro-accounts, investment funds of institutions, provisional accounts, provisional deposits, court deposits, postal orders, various funds and deposits of social organizations and social insurance, various other sight liabilities. Source: Staisticki bilten, No.2. 1966 Table 23 - SHORT-TERM CREDITS TO ENTERPRISES FOR WORKING ASSETS (millions of dinars) End of Industry Agricul- Construc- Trans- Handi- Total cre Year and ture tion port Trade craft Other dits for mining 2/ Working Assets 1954 3,577 294 292 233 2,407 136 36 6,975 1955 4,069 306 303 219 2,609 147 43 7,696 1956 2,439 296 171 100 3,108 139 62 6,615 1957 3,034 469 199 108 4,100 192 94 8,196 1958 3,266 633 259 99 4,502 229 125 9,113 1959 3,606 1,021 383 202 5,410 255 416 11,293 1960 4,465 1,351 411 97 5,773 283 267 12,647- 1961 5,542 1,552 317 121 6,421 305 371 14,629 1962 7,196 2,168 343 151 5,642 331 602 16,1433 1963 7,985 2,780 353 123 7,331 324 390 19,286 1964 8,767 3,516 319 87 8,172 318 368 21,547 1965 10,353 3,616 218 83 9,414 338 356 24,378 2/ Inciudind exploitation of forests Source: Statistical Bulletin No.2 1966. Table 2[: IONZY SUPPLY ACCOTZDING TO THE 14- DEFINITION (millions of dinars) Position Changes 1963 1964 1965 1964 1965 Sight liabilities - deposit money 14,252 15,572 14,780 1,312 .-792 Economic organizations 5,498 6,653 8,514 1,155 1,861 Of which major items: Giro accounts of economic organizations 3,514 3,942 5,125 428 1,181 Depreciation of economic organizations 1,125 1,467 1,757 342 290 Federal government 1,454 1,205 346 -249 -859 Other socio-political communities 844 721 551 -123 -170 Not placed resources of social investment funds and investment balance sheets 4,320 3,908 2,260 -412 -1,648 Other organizations 1,725 2,648 2,870 923 222 Of which major items: - Social insurance 529 880 685 351 -195 - Institutions 665 743 832 78 89 - bocial organizations 197 221 290 24 69 Population 231 195 142 -36 -53 Foreign countries 181 242 97 61 -145 Currency in circulation 3,596 i22 5144 L0 5-5 Float 1776 2 2 340 Lone supply 19,400 21,94Z 22,040 L.51z 93 Source: National Bank: preliminary estimates Table 25: BALANCE OF PAYENTS (in millions of dollars) 1960 1961 1962 1963 1964 19651 A. Goods and services Exports, f.o.b. 576 581 699 800 905 1118 Imports, c.i.f. -8h6 -929 -900 -1080 -130 -1321 Trade balance -270 -3b8 -201 -280 -438 -203 Travel (net) 7 8 22 b4 56 65 Transportation (net) 48 55 67 78 92 110 Investment income (net) -11 -18 -21 -30 -35 -3 Other services (netj 15 16 21 bb 63 59 Total 59 31 89 136 176 191 B. Private donations 39 36 hb 59 48 51 Total+(A + B) -172 -251 -68 -85 -214 +39 C. Official long-term capital Long-term credits received 25 b8 58 b8 57 h3 Medium-term credits received 53 90 88 174 136 222 Credits for excharge reform - 11 51 18 - - Official repayments -47 -65 -83 -106 -l5 -184 Repayments for nationalized property -10 -5 -6 -7 -4 -4 Reparations 24 11 lb 3 3 2 Export credits (net) -lb -2h -36 -27 -33 -39 Agricultural surpluses (for dinars) 22 60 58 89 17 - Agricultural surpluses (for dollars) - - 16 29 40 100 Total 3_ 256 160 221 71 1b0 D. Official short-term capital and monetary gold Increase of gold quota with IMF -12 - - - - - Payments agreements (net) 8 -57 31 13 b0 -80 Other foreign liabilities and 107 68 -78 -129 84 -74 assets Gold and foreign exchange 16 -16 -h5 -20 19 -25 reserves Total 119 -5 -92 -136 143 -179 Total (C + D) +172 +251 +68 +85 +21h -2 1/ Preliminary 2/ Trade figures corrected to include finishing, repairing, non-commercial transactions etc. Source: Data submitted by the Yugoslav authorities Table 2.6. EXPORTS AND IMPORTS, BY COMMODITY GROUP (in millions of dollars) 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 Exports, Total 186 240 257 323 395 441 477 566 $59 691 790 893 1091 Foodstuffs 36 72 62 86 103 134 126 164 169 161 204 212 231 Beverages and tobacco 7 10 20 26 26 38 24 27 22 30 39 5o 49 Raw materials except fuels 70 71 75 77 82 75 76 88 85 95 109 118 110 Minerals fuels and related materials 2 3 3 4 7 6 5 5 7 17 15 12 11 Animal and vegetable, fats and oils 0 0 0 - - - - 1 0 1 0 0 0 Chemicals 10 10 14 1 19 14 15 23 20 21 26 38 59 Manufactured goods 55 60 71 89 109 102 118 134 129 156 169 205 248 Machinery and transport equipment 3 8 5 15 27 47 83 85 9k 158 154 152 257 Miscellaneous manufactured articles 3 5 7 12 22 24 29 38 42 51 73 105 126 Others 0 1 0 0 .0 1 1 1 1 1 '1 1 , Q Imports, Total 395 339 441 474 661 685 687 825 910 .888 1057 13?3 1288 Foodstuffs 111 121 151 1 731 13-3 -7; 170 127 19T 1 18 Beverages and tobacco 0 0 1 0 1 1 0 0 1 4 7 3 1 Raw materials, except fuels 50 51 77 75 97 84 96 118 130 133 159 209 217 Mineral fuels 31 30 36 47 65 41 45 45 ho 48 47 66 72 Animal and vegetable, fats and oils 5 6 5 6 13 1 16 12 15 14 11 16 13 Chemicals 17 21 29 33 48 67 75 71 64 78 111 138 119 Manufactured goods 50 51 52 58 104 108 108 172 185 163 187 278 279 Machinery and transport equipment 126 91 112 9k 168 216 192 30k 32k 293 307 398 355 Miscellaneous manufactured articles 5 6 7 10 15 20 20 27 31 28 3k 50 43 Others - 1 1 - 3 3 2 .1 0 0 0 0 9 Source: Statiskika spoljne trgovine. Table 27: :?XPORTS OF MAJOR COMMO TIES 1961-1965 Thousand metric tons Millions of dollars 1961 1962 1963 196h 196 1961 1962 196319611 196 Livestock 101.5 78.2 83.8 39.7 30.3 36.5 30.3 35.5 20.3 16.4 Meat: fresh 60.6 87.8 96.4 116.2 130.3 33.3 47.5 68.4 93.1 11.0 Meat: preserved 24.5 22.4 25.3 32.4 37.7 22.8 21.3 24.2 32.3 39.2 Fish: preserved 18.8 18.7 19.1 19.3 17.3 9.4 9.4 9.8 10.2 9.5 Maize 376.4 27.8 104.3 17.7 48.3 19.8 1.5 6.0 1.1 3.1 Fruit and nuts 28.3 75.4 38.9 66.5 55.2 4.3 9.1 6.7 9.6 4.8 Dried Fruit 15.6 15.4 33.7 18.9 13.4 4.2 b.9 9.8 5.7 4.3 Fruits prepared 22.7 31.2 28.1 34.1 41.1 4.4 6.0 6.1 8.2 10.4 Vegetables 40.2 16.0 19.6 18.2 23.1 10.5 8.6 12.0 11.0 12.1 Alcoholic beverages 4O.5 52.9 48.3 57.8 50.3 5.7 8.3 8.5 10.7 11.9 Tobacco 15.9 15.5 16.8 22.7 23.1 16.5 21.3 30.2 38.6 36.9 Wood, round 375.2 343.9 324.3 297.0 286.0 5.6 4.9 4.6 4.5 5.0 Wood, rough or simply worked 407.2 551.7 579.6 631.6 580.2 31.1 39.8 41.2 44.0 42.5 Crude mineral ores 238.9 268.3 292.5 226.5 457.3 7.2 8.4 9.6 11.7 12.3 Non-ferrous ores and concentrates 1,244.9 1,282.3 1,341.5 1,260.2 1,207.8 10.7 12.2 11.9 14.3 11.8 Inerg-enic chemicals 94.3 104.0 120.6 120.3 131.6 9.8 9.0 10,2 12.7 19.4 Wood manufactures n.e.s. 41.3 29.8 33.2 42.0 33.8 6.8 6.1 7.2 8.3 7.5 Cotton fabrics 7.5 10.4 15.1 14.2 14.1 11.0 13.6 18.5 17.0 20.2 Iron and steel 203.6 311.5 253.3 211.4 212.2 32.7 40.2 33.5 30.4 35.0 Copper 13.5 16.3 18.7 22.2 22.3 12.6 18.4 17.6 21.6 28.4 Lead 59.0 57.6 65.0 62.8 62.2 11.3 11.5 11.7 15.5 19.3 Manufact. of metals. n.e.s. 39.2 42.2 48.2 58.1 86.4 11.2 13.7 15.2 23.7 36.4 Electr. machine & appliances 44.2 42.6 53.4 58.4 75.7 7.7 8.7 11.0 11.6 18.9 Ships and boats 46.2 92.1 107.4 76.5 124.0 8.3 19.8 16.5 12.2 23.7 Furniture and fixtures 33.7 38.5 48.8 58.4 57.8 3.9 4.8 6.1 7.6 8.4 Source: Statistics of Foreign Trade of Yugoslavia. Table 28: IMPORTS OF MAJOR CoIMOUE TIES 1961-1965 Thousand metric tons Millions of Dollars 1961 1962 1963 196b, 1965 R61 -- 196 1963 1964 1965 Milk and Cream: dried, etc. 20.9 18.2 23.1 19.8 14.6 5.6 3.3 3.9 3.7 4.2 wheat 744.5 734.6 1,438.8 610.7 1,192.6 54.3 55.6 107.5 46.6 86.0 Rice 13.7 4.1 38.9 36.9 26.4 2.2 5.3 5.4 5.8 3.9 Sugar 107.3 131.4 5ho6 109.9 95.7 9.0 9.1 5.8 17.3 6.2 Coffee 9.6 10.3 17.8 15.7 17.6 7.3 8.7 14.1 15.1 16.7 Leather & skins 25.1 27.4 29.0 38.6 35.5 14.1 15.3 14.2 22.4 21.0 Dilseeds, etc. 10.8 21.7 29.5 35.3 28.2 1.5 3.4 4.4 5.6 4.5 Crude rubber, etc. 17.6 21.7 25.6 30.9 34.1 11.3 12.5 13.8 15.1 16.2 Wool, etc. 14.4 9.3 14.5 19.4 22.7 21.4 16.9 26.3 39.9 32.0 Cotton 57.3 64.2 72.2 86.7 95.7 38.1 42.4 45.9 57.3 64.7 Synthetic fibers 3.0 3.9 8.4 11.2 10.7 3.4 4.5 7.7 10.8 10.3 Coal 1,473.1 1,369.3 1,460.8 2,027.6 2,186.6 21.5 19.1 19.8 29.3 32.0 Petroleum 287.2 746.9 778.1 760.3 1,107.0 5.2 12.3 13.3 12.0 16.8 Petroleum products 207.9 320.3 220.7 455.8 396.4 8.9 11.4 8.7 16.5 15.4 Organic chemicals 32.0 33.8 44.5 59.9 77.4 9.7 8.9 11.9 16.0 21.8 Coal-tar, natural indigo 1.3 1.5 2.4 .2.9 3.1 4.1 4.8 8.8 11.3 11.8 Medicinal & pharm.. products '2. 2.3 2.6 2.6 0.9 9.6 9.4 10.2 11.2 9.7 Fertilisers, manufactured 463.2 748.7 1,168.1 1,057.1 478.5 14.8 20.9 34.0 41.4 21.0 Rubber manufactures 8.6 5.0 6.5 13.1 16.5 9.7 5.6 7.5 13.9 18.3 Textile, yarn & thread 9.5 6.3 5.2 7.2 7.I 21.7 18.2 15.8 21.2 17.9 Iron & steel 474.9 499.0 588.4 834.1 885.0 74.8 74.6 87.6 122.9 124.1 Manu. of mebals, n.:e.s> *16.4 13.6 11.1 20.3 18.7 15.1 12.6 13.5 21.2 21.9 Power generating machinery 19,l 15.0 18.3 15.4 13.2 38.3 28.2 39.3 33.6 26.4 Tractors, other than steam 2.2 1.8 3.5 9.1 3.4 2.3 2.0 2.7 5.9 2.3 Metal-working machinery 11.0 17.8 15.3 32.8 19.7 17.9 37.7 31.6 60.5 40.4 Machinery n.e.s. 85.2 80.9 73.0 83.4 66.5 140.7 133.9 134.2 167.5 145.1 Electr. mach. ! .ppliances 15.3 16.8 23.8 24.0 27.5 47.9 43.3 57.8 68.4 63.1 Railway vehicles 26.3 15.9 11.0 24.0 14.7 27.3 11.3 4.4 9.8 8.3 Road motor vehicles 32.1 19.1 15.5 29.7 35.4 37.9 24.5 22.4 43.0 51.8 Ships & boats 55.1 126.1 36.3 60.3 65.6 4.9 10.4 2.3 6.0 12.2 Instruments, etc. 1.1 1.0 1.2 2.0 1.7 10.3 10.0 10.0 16.4 13.6 Source: Statistics of Foreign trade of Yugoslavia Table 29: EXPORTS BY AREAS AND MAJOR COUNTRIES OF DESTINATION (in millions of dollars) 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 Total 247 186 340 257 323 395 441 477 56 5.69 691 g9 3 L.1 Western Europe 194 146 186 155 182 206 225 220 259 263 309 386 388 403 Soviet bloc - - 6 36 74 105 125 147 182 176 167 211 308 459 U.S.-Canada 36 26 23 28 28 34 33 32 39 38 55 49 53 64 Latin America 4 3 11 18 11 2 4 9 10 12 32 16 22 17 Middle East 11 8 12 14 15 29 28 28 37 37 46 44 42 46 Other Asia - - - 1 11 12 18 34 29 37 59 42 58 69 Rest of the world 2 3 2 5 2 7 10 7 10 6 23 42 22 33 Selected Countries West Germany 58 31 47 34 49 51 42 45 51 58 71 81 80 96 Italy 31 24 30 39 46 54 54 58 75 70 96 158 132 144 United Kingdom 35 22 23 20 20 24 35 34 43 48 49 43 55 36 Switzerland 6 6 9 10 16 15 19 10 8 7 17 13 17 18 France 12 7 7 9 9 10 16 12 9 10 10 17 18 18 Austria 26 12 20 15 17 19 19 21 30 26 27 28 31 28 Turkey 3 23 24 11 2 3 2 2 3 3 14 5 4 4 USSR - - 2 18 12 50 36 47 53 51 43 85 116 187 Poland - - - 4 9 16 22 34 22 40 42 38 39 64 Hungary - - 1 3 6 12 14 13 20 18 11 12 24 26 Czechoslovakia - - 3 7 8 9 20 16 26 17 21 23 45 71 USA 32 26 23 28 27 34 33 31 39 37 52 46 51 62 Brazil 2 2 7 15 7 1 1 1 6 2 13 7 15 2 UAR 6 4 2 2 3 13 17 13 19 17 21 18 13 20 Israel 2 2 4 4 4 5 3 3 4 8 9 7 8 6 Source: Statistika spoljne trgovine . TLble 30: IMPURTj BY AREAS AND FAJOR COUNTRIES OF ORIGIN (in millions of dollars) 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 Total 395 339 441 4 662 685 687 8 9 888 105 1323 1288 .estern Europe 228 196 203 185 277 290 291 398 458 390 437 545 504 Soviet bloc - 4 33 105 143 194 170 212 169 189 241 379 369 US-Canada 145 102 144 129 174 134 142 92 183 184 204 178 195 Latin America 4 13 21 19 12 13 15 17 24 20 30 54 40 i,iddle Last 12 13 15 14 24 25 24 48 22 32 43 57 54 Other Lsia 3 4 19 16 24 14 27 32 30 49 62 58 69 .Rest of the World 3 7 6 6 8 15 18 27 24 24 40 52 57 Selected Countries W est Germany 69 57 55 47 75 80 96 123 143 100 98 113 117 Italy 28 23 43 41 79 68 64 95 133 104 113 174 138 United Kingdom 25 21 21 33 40 36 35 45 46 48 51 69 62 Switzerland 6 7 10 10 15 16 13 18 16 16 22 21 21 France 30 19 11 14 10 21 14 27 23 27 48 49 47 austria 21 22 20 19 25 25 26 37 32 32 32 35 34 Turkey 12 18 9 2 3 3 2 2 2 3 3 5 6 U3sbR - 1 14 70 69 58 58 57 32 59 73 100 108 Poland - - 4 8 19 36 20 38 29 32 33 60 57 Hungary - 1 3 7 20 36 32 37 33 21 25 35 31 Czechoslovakia - 1 7 12 19 27 23 26 20 26 43 82 71 U.S*^* 136 95 144 129 174 134 140 88 181 183 186 173 190 Brazil 3 10 14 7 3 4 3 7 8 3 8 11 15 Ujta 3 3 5 4 9 12 10 36 8 12 17 24 24 Israel - 2 3 3 5 6 5 5 6 10 7 10 10 China (hainland) - - 0 4 8 1 3 1 0 0 0 0 0 11alay & Singapore 2 3 3 5 7 2 5 9 8 3 3 6 6 Source: otatistika spoljne trgovine Table 31: RECEIPTS AND PAYMENTS FOR SERVICES 1960-1965 -3 (In millions of U.S. Dollars) 1960 1961 1962 1963 1964 1965 1/ Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Freight 65.4 - 87.7 - 99.7 - 111.8 - 132.9 - 150.0 - Other transportation 12.7 30.0 11.6 43.7 16.0 48.3 21.9 52.9 24.2 65't7 30.0 70.0 Travel 14.2 7.8 20.2 12.1 31.5 9.3 52.9 8.8 68.5 12.8 80.0 15.0 Investment income 1.4 12.2 1.7 18.7 3.8 25.0 4.2 37.9 8.6 56.6 8.0 64.0 Government, n.i.e. 5.7 16.1 7.0 19.6 16.5 24.9 18.2 15.9 16.8 20.1 18.0 23.0 Insurance 7.8 3.9 12.3 4.7 8,2 5.3 10.0 6.2 11.5 6.2 13.0 9.0 Other services 29.0 9.8 27.0 9.1 33.2 14.0 51.9 14.7 79.9 18.8 82.0 23.0 Total 136.2 79.8 167.5 107.9 208.9 126.8 270.9 136.4 342.4 180.2 381.0 204.0 (Net) (56.4) (59.6) (82.1) (134.5) (162.2) (177.0) 1/ Preliminary Source: Data submitted by the Yugoslav authorities. Table 32:. SHORT TERI EXTERI NAL DEDT. 1960-1965 (in Nillions of dollars) Face amount Uncommitted Committed (Undisbursed) Disbursed and ____ ___ ____ ___ ____ ___ _ _ ____ ___ ____ ___ ___Outstanding IEnd of: Tot1 Bank Comercdial. Bank Ca-mEr:a Bank Commecn.al Bank Commercial ta credits credits Total credits credits Total credits credits Total credits credits 1960 162.2 106.2 56.0 40.6 40.6 - 34.5 16.2 18.3 87.1 49.4 37.7 1963 247.9 160.6 87.3 123.1 123.1 - 23.3 8.9 14.4 101.5 28.6 72.9 1964 376.5 269.4 107.1 149.5 149.5 - 61.1 31.1 30.0 165.9 88.8 77.1 1965 369.5 319.2 50.3 151.6 151.6 - 43.0 28.2 14.8 174.9 139.4 35.5 6ource: Yugoslav National Bank Table33. SCHEDULE OF CONDITIONS OF OFFICIAL CREDITS MADE AVAILABLE TO YUGOSLAVIA IN. THE PERIOD 1962-1965 Repayment terms Interest rate Year Amount ($million) Up to 5 5 - 8 8 - 10 Over 10 years 5 years years years years Up to 5% 5-65 Over 6, 1962 121.2 2i. 250 1r 12 60! 2% 49; 49 1963 51.0 754 36' - 22"" 77,1l 1964 125.8 3 28, 21 31'- 17" 100 83 7 1965 171.0 2701 14', 43 24; 5ri 92, 35 uiverage for 1957-1965 12 36; 15 200 171 15 77; Source: Yugoslav Investment Bank TABLE 34: YUGOSLAVIA - EXTERNAL MEDIUM - AND LONG-TER21 /1 PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF JUNE 30, 1965 Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Debt outstanding June 30, 1965 Iet of Includin- undisbursed undisbursed TOTAL EXTERNAL PUBLIC DEBT 875.878 1,352,856 Pre-wer publicly issued bonds&2 2,87 2,8h7 Privately-placed debt 29,9025 518,376 Suppliers' credits/2 2h2,77h 72,731 Private bank credits 16.251 ___6__ IBRD loans 13$.696 238,970 Eurofina 8.12 8,lh2 U.S. Governnent loans 217,196 250.17h Export-IT-port Bank 60,553 62,250 Other U.S. Government 156,63 187,92 AID 14,833 18,825 Agricultural Assistance Act. ll,810 169,099 Loans fror other d.estern ,overnments 169,891 217,726 United Kingdo' 20,098 22,898 Austria 4,8o6 h,81h France 26,282 36,525 Germany 1j3,560 5,80 Italy 67,926 100,206 Netherlands 2,818 2,902 Suitzerland 6Ih00 6, 00 Sino-Soviet loans 71,287 10h,825 Settlement for Nationalized Property 11,796 11.796 /1 Debt with an ori.inal or extended maturity of one year or more. /2 Does not include the unsettled pre-'.orld .ar II debt to SUiss, British and U.S. bondholders, totalling approximately $27,620,000. /3 Some loans from Zovernments may be included under suppliers' credits. / FOnly tho portions payable in dollars are included in this table. Source: IB2D - Econo.,ics Departnent TABLE 35: YUGOSLAVIA - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL MEDIUM AND LONG-TERM PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF JUNE 30, 1965 /1 Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) DEBT OUTST PAYIENTS DURING PERIOD (BEGIN OF PERIOD) INCLUDING AMORTI- YEAR UNDISBURSED ZATION INTEREST TOTAL 1965 1,347,375 /Z 167,654 34,492 202,lh6 1966 1,241,121 208,335 46,157 254,93 1967 1,032,786 160,001 43,561 203,562 1968 872,785 128,879 39,042 167,920 1969 743,906 110,529 34,680 145,209 1970 633,378 97,474 29,712 127,186 1971 535,907 73,452 24,700 98,152 1972 462,452 59,128 21,723 80,851 1973 403,324 54,171 19,061 73,232 1974 349,152 51,458 16,201 67,659 1975 297,695 41,174 14,028 55,202 1976 256,521 85,388 12,365 97,753 1977 171,133 21,759 8,636 30,395 1978 1h9,373 19,590 7,537 27,127 1979 129,783 15,000 6,642 21,642 /1 Includes service on all debt listed in Table 1 prepared June 8, 1966 except the following for which repayment terms are not available: a. S76,512,600 credit for repayment of swing credit of March 27, 1964 of which $2,575,000 is still outstanding. b. East German 0 $2,906,100 credit to Kolubara Vreoci. /2 Amount outstanding is as of June 30, 1965; payments are for the entire year 1965. Source: IBRD Economic Department.