Transformation of the Polish Economy

Abstract

At the time of the start of the process of its socioeconomic transforrnation, Poland chose the variant of shock therapy based on a restrictive monetary and fiscal policy. Due to the fact that, at the end of 1989, Poland was coping with deep destabilization, high inflation (20-30 percent a month), a huge budget deficit, and major shortages of producer and consumer goods, the most important economic goal was to get inflation under control and achieve market and budget equilibrium. January 1990 saw the start of the implementation of the government stabilization program, commonly known in Poland as the Balcerowicz Plan after the vice-premier and finance minister in the first noncommunist government in Poland, while outside Poland it was associated with the name of Jeffrey Sachs. At that time, fundamental changes were introduced in the economic system, which were to pave the way for transition to a market economy. The changes consisted of: -resigning almost completely from the official fixing of prices; abolishing administrative rationing of production supplies; -restricting budgetary subsidies; --adopting a restrictive monetary policy; -introducing the internal convertibility of the Polish currency, the zloty, and stabilizing the exchange rate;