YUGOSLAVIA DEBT PAYMENTS TO BE ADJUSTED TO EXPORTS
Yugoslav Prime Minister Branko Mikulic,
unveiling a new draft economic program, said Yugoslavia would
cut repayments on its almost 20 billion lr hard currency debt
to bring them in line with its hard currency earning capacity.
    "We have decided to coordinate repayment of our debt with
realistically assessed capabilities of our economy," he said in
Parliament. He said the current debt-service ratio (over 40 pct
of export revenue) was too high.
    Yugoslavia is to negotiate a long-term restructuring of its
debt after missing repayments in recent months, Mikulic said.
    "If we did not change the dynamics of repaying our debt, the
situation would become increasingly worse," Mikulic said.
    He said on the present repayment schedule, Yugoslavia would
have a net outflow of two billion dlrs and the level of debt
would be halved by 1995. But he added:
    "The consequences would not only mean slower economic growth
in the coming years but also further exhaustion of the economy
and lasting damage to the economy's capacity for development,"
he said.
    "All that would, of course, intensify social difficulties,"
Mikulic added.
    The state news agency Tanjug said on October 9 that
Yugoslavia plans to adjust debt repayments over the next eight
years and to cut the debt-service ratio to 25 pct.
    Yugoslavia failed to make a principal repayment due last
month which had already been postponed by 90 days.
    Mikulic's proposed economic program, which also includes
higher personal taxes as well as wage and price restraint, is
intended to serve as a basis for the debt talks to demonstrate
Yugoslavia's ability to eventually repay the credits.
    His program has to be discussed and approved by parliament
by early November.
    Mikulic said foreign debt should be retained at about the
same level as now until 1990 and the country should then be
able to keep currency reserves equal to three months payments.
    "Of course, these are our proposals for talks with
creditors. We expect understanding and support because it is in
their interest as well," Mikulic said.
    He said that under the present schedule debt payments had
slowed economic development and exhausted currency reserves.
Banking sources say Yugoslavia's reserves are inadequate at
present for even one month's debt and import bill.
 REUTER
