Officials To Help Poles on Economy
WHEN International Monetary Fund officials arrive in Poland next Tuesday, they will find their work cut out for them. They will be trying to help the Poles put their foundering economy in working order. In IMF jargon, the Poles and fund officials will be drafting a ``structural-adjustment program'' of reforms intended to revitalize the economy. Fund officials will be joined by East European specialists from the World Bank.
As soon as Polish and IMF officials agree on a program, the Polish government will meet with the Paris Club - the organization of government creditors - and commercial bankers to renegotiate much of its $39 billion in external debt.
Top Polish officials presented a financial wish list to potential donors last week at the joint annual meeting of the IMF and the World Bank here.
Poland's economic recovery program will involve three stages. The first, expected to be formalized by December, is to provide for short-term (one-year) macroeconomic adjustments, that is, changes in fiscal and monetary policies. The IMF will be ``in the driver's seat,'' according to Eugenio Lari, World Bank director for Europe, the Middle East, and North Africa.
The fund will offer ``stand-by loans'' to facilitate these reforms; these could amount to $700 million. During this period, the World Bank will review loans for specific projects and sectors of the economy that are ``geared toward the medium term, and deepening the IMF principles,'' says Mr. Lari. The bank has already approved between $300 million and $400 million in loans, which Lari projects will be ``quickly dispersed and in gear by mid-1990.''
The second stage is a micro-level program, designed to stimulate the supply of goods and services in the Polish economy. ``This is very urgent,'' says Lari, ``and may be brought up as early as October 1989. We are not going to wait for a structural adjustment to be in place before we initiate privatization and demobilization of overburdened state-owned enterprise.'' The state sector composes 90 percent of Poland's gross national product.
Wladyslaw Baka, president of the Bank of Poland, says that Poland will have ``no trouble'' finding a way to spend the $10 billion in international assistance it is seeking over the next three years.
``We have several problems which need foreign assistance,'' he told the Monitor. ``The first is stabilization and having a convertible currency, which needs foreign-exchange support. The second is structural changes in the economy, including new investment and replacement of used equipment. The third is money to change ownership of our economy and to support the private sector. And the fourth is to assist the introduction of market forces.''
Mr. Baka expects a new stock exchange - a radical departure from communist ideology - to be established by the first quarter of 1990. ``I emphasize the word gradual when I talk of this establishment,'' he says.
Finance Minister Leszek Balcerowicz outlined on Sept. 29 his plan for transforming a failed Marxist-oriented economy into one that's market-driven. Its provisions involve sacrifices that likely will outpace any noticeable improvements in everyday existence. Dismantling government monopolies will cost jobs. Lifting across-the-board subsidies on consumer goods means instant price hikes. And a ceiling on wage increases will not win favor among the very workers who put into power Poland's first democratic government in 40 years.
The country's patience is ``on a time bomb,'' says Lari. He is concerned that Warsaw's decisions will be slowed on the provincial level. ``It remains to be seen whether the locals are on the same wavelength as the national leadership. If Warsaw does not speak the same language as Krakow, for example, there will be a lot of trouble.'' He expressed the hope that municipal elections will be held as soon as possible, alluding to the tenuous political support for the new government.
``Solidarity [the powerful noncommunist trade union] will not strike for the time being. The workers are anxious to give the government a chance, to see some real benefit of new economic policies,'' says Jan Pakulski, a Pole who is secretary-general of Youth for Development and Cooperation, a major nongovernmental organization based in Amsterdam. ``The Poles are willing to take a ride with the government, but if their situation does not improve in real terms, that ride could be severely curtailed.''
Mr. Pakulski's twin sister, a medical doctor in Warsaw, tells him that many young professionals are suffering from malnutrition. ``That's how far-reaching our problems are,'' he says.
Lari stresses that ``something must be done up front quickly. Softening the impact of adjustment on the population is crucial at this stage.'' With an IMF structural-adjustment program in place, he says, there is a risk that the government will overlook vulnerable social groups, including those who are underemployed or on pensions.
A World Bank loan can be structured to ease some of the initial burdens imposed by austerity measures, Pakulski notes. He identifies the country's acute housing shortage as a primary concern: ``Mitigating this problem is the best way of winning public support.''
Finance Minister Balcerowicz asked for $1.5 billion in immediate assistance - $500 million to sustain imports over the last quarter of this year and an additional $1 billion to pay for next year's economic stabilization efforts.
A top priority is establishing a banking sector, says Baka, the nation's top central banker. ``Now what we need are some pioneering moves in this area. I hope we will use the good experiences of Western central banks and not their mistakes.
``The Europeans have a major role in the emergency aid for Poland,'' says Lari.
Last week the European Community did pledge $325 million to Poland and Hungary for 1989. EC Commission President Jacques Delors pointed to the countries' respective economic problems as threats to Poland's political reforms. He then asked the non-EC industrialized countries to commit themselves to a collective further $325 million.
President Bush has offered $169 million in assistance. Congressional Democrats are using the US government's approach to East-bloc aid, in particular that for Hungary and Poland, as a measure of the success of the president's first months of foreign policy. They charge Mr. Bush with failing by responding with too little, too late, and thus delaying the disassembling of the Iron Curtain.
``Do not expect any substantial guarantees or flow of funds out of Congress or the executive,'' warns Eugene Rotberg, executive vice president of Merrill Lynch and a former treasurer of the World Bank.
``The US will not be a major player as a government, and commercial bankers will offer no new loans,'' Mr. Rotberg predicts. He expects commercial banks to take 50 percent to 60 percent losses on their outstanding Polish loans.
Merrill Lynch may advise the Poles on debt restructuring and ways to bring in foreign capital.
A good portion of that foreign capital may come from Japan.
Of Poland's $39 billion debt, $26 billion is owed to the industrial countries belonging to the Paris Club. The country owed most by far is West Germany, followed in order by Austria, France, the United States (more than $2 billion), and Britain.
The commercial banks are owed $8 billion to $9 billion, with roughly the same ranking. The German banks lead in total exposure, with the trade union-owned Bank Fuer Gemeinwirtschaft first among them. Next to this group is Banque National De Paris. Three billion out of the $4 billion remaining is convertible currency debt to the Soviet Union. Just under $1 billion is owed to Middle Eastern banks that are not part of the London Club.