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Polish Finance Minister Andrzej Olechowski resigned yesterday after parliament approved heavy spending by canceling two 1991 laws that reduced state pensions and froze salaries for public employees.

"In accordance with my previous statements I submitted my resignation to Prime Minister Jan Olszewski," Mr. Olechowski told reporters immediately after the lower house of parliament, the Sejm, decided to add a huge extra payments burden to the 1992 budget, already dripping with red ink.

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The decision will put the planned deficit over a limit of 5 percent of the GDP set by the International Monetary Fund, and Olechowski said it would add up to $2.2 billion increase the proposed deficit of $4.7 billion.

"I don't see any way to make these payments possible," Olechowski said.

The resignation of Olechowski, who has been minister for less than two months, is a serious blow to the minority government, which has been struggling to survive since it was formed in December.

"If he goes it means serious questions will be raised in the West about the ability of the government to carry on with the reform program and even to carry on at all. It is a serious blow," a Western diplomat said.

The government has so far failed to propose any major economic reform legislation.

Government spokesman Marcin Gugulski told reporters that the government was not planning to step down after Olechowski's resignation.

"I can assure you 99 percent that the government will not resign because it is responsible for the state and for the budget," Gugulski said.

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The resignation has to be approved by Olszewski and then by parliament.

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