Poland takes steps to cut debt
POLAND has taken two significant steps recently to improve its financial condition, strengthening the nation's market reform foundation.
Following intense negotiations, Polish officials last Friday announced a landmark debt-restructuring deal with creditor commercial banks. The deal will cut Poland's current $12.3 billion debt to commercial banks by about 40 percent.
The agreement should greatly enhance Warsaw's financial credibility, increasing the nation's ability to attract new foreign investment and loans. ``Thanks to the agreement, Poland's economic development will have a solid basis,'' the Associated Press quoted Polish Prime Minister Waldemar Pawlak as saying.
The way for the commercial bank debt restructuring was paved a week earlier when the Polish parliament - controlled by left-wing parties with strong links to the former Communist Party - approved an austere national budget of $31.6 billion.
Under budget guidelines, the deficit will be limited to about $3.8 billion, or 4.1 percent of gross national product (GNP). That should enable Poland to obtain new loans from the International Monetary Fund, which advises countries making the transition to a market economy to limit deficits to under 5 percent of GNP.
The strict budget also cements an agreement scheduled to go into effect next year that should reduce Poland's $30.6 billion debt to Western governments by 20 percent.
The debt relief gives more breathing space to a Polish economy that is showing signs of recovery. According to government estimates, the Polish economy should grow 4.5 percent in 1994, while yearly inflation drops to about 23 percent.