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As reforms proceed, Romanians lose purchasing power

January 23, 1997

BUCHAREST, Romania (AP) _ In an attempt to make life better, the new government warned it must first make it worse. And it has: the price of bread has tripled and milk has doubled since New Years Day.

The average Romanian now spends two-thirds of his income on food.

``We can’t live just on bread and soup,″ Vasile Panoiu, a worker who earns $43 a month, said. ``I have a high-schooler. How can I feed him and buy him clothes?″

Prices have been spiraling upward since the government began to introduce reforms. On Jan. 1, it doubled fuel prices to compensate for the currency’s erosion. The cost of eggs has shot up from 3 cents each to 7 cents. Detergent, shoes, gasoline _ all have gotten more expensive.

The national currency, the leu, has been devalued by nearly 27 percent in the last month, and the average salary now equals $71 _ down from almost $100 in December.

The government has been pushed into liberalizing food and energy prices by organizations such as the International Monetary Fund, which have conditioned loans on economic reform.

Prime Minister Victor Ciorbea, who took office in November, pledged to free controls. On Feb. 1, the government will decide whether prices on basic foodstuffs should be determined by the market or remain state-controlled.

``I don’t agree with the liberalization of prices,″ said Paul Moraru, who is unemployed. ``We can’t bear these price rises. Before, there was talk of compensation. Now you hear nothing.″

The government is no longer indexing salaries to inflation, which ran at 57 percent last year.

The National Bank of Romania set the rate Wednesday at 5,360 lei to the dollar. The leu will drop a further 3.7 percent today to 5,567 lei to the dollar.

Pawn brokers offering interest rates of 1.5 percent per day have sprung up all over the capital of Bucharest. Romanians are exchanging their lei to dollars or other hard currencies as fast as they can.

Once the government secures a $50 million loan from the World Bank, expected within weeks, it said it will start offering some aid to the very poor.

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