Abstract: The importance of external debt emerged as a critical component of Yugoslavia’s crisis in the late 1970s and early 1980s.The article comprehensively examines the underlying factors contributing to the accumulation of significant debt, analyzes the government’s reactive measures to address the financial situation, and looks at the state-level strategic initiatives undertaken by the Socialist Federal Republic of Yugoslavia (SFRY) in 1980. These attempts sought to protect external liquidity by obtaining extra loans from prominent Western nations, engaging with the International Monetary Fund (IMF), and negotiating for financial aid from Kuwait.

Keywords: Yugoslavia, foreign debt, loans, USA, France, FR Germany, Great Britain, International Monetary Fund, Kuwait

Summary

Foreign debt became a major concern in socialist Yugoslavia in the late1970s, reaching a total of approximately $20 billion. Recognizing the gravity of the situation, particularly the significant foreign exchange imbalance, the Yugoslav government implemented a two-pronged reaction. This required implementing economic measures targeted at reducing salary disparities and seeking more loans as remedial options. Beginning in the spring of 1980, Yugoslavia launched a diplomatic push to secure extra financial aid from developed Western countries, the International Monetary Fund (IMF), and Kuwait. By June 1980, the IMF had responded to Yugoslavia’s petition, allowing access to Fund cash totaling 440 million dollars. Faced with commercial banks’ reluctance to grant loans, Yugoslav officials sought to use political influence from Western governments to urge for approval. Yugoslavia intentionally prioritized obtaining bilateral loans from Western nations above requesting financial assistance from the bloc of states. In contrast to Yugoslav aspirations, Western nations collaborated, exhibiting cooperation and consultation with the IMF. While Yugoslavia successfully negotiated bilateral agreements with France, Italy, Austria, and the Socialist Republic of Germany, it was unable to reach similar deals with the United States and the United Kingdom. As a result, Yugoslavia was forced to accept a $400 million syndicated loan given by banks from other countries. Particularly, Kuwait proved to be a more accommodating supplier, extending a $250 million loan in the second half of 1980. Although Yugoslavia was able to maintain external financial stability in 1980 thanks to agreements with Western nations, the IMF, and Kuwait, this was only a postponement of the country’s impending insolvency, which occurred in 1982 and 1983. At the same time, 1980 was the last year in which Yugoslavia received loans from the West without strict conditions.