Poland Table of Contents
The gravity of the economic crisis and the immediate threat of hyperinflation caused the Mazowiecki government to choose a "shock strategy." Called the Balcerowicz Plan after its chief architect, Minister of Finance Leszek Balcerowicz, the program received approval and financial support from the International Monetary Fund (IMF--see Glossary). On January 1, 1990, a program for marketization was introduced together with harsh stabilization measures, a restructuring program, and a social program to protect the poorest members of the society. The program included liberalizing controls on almost all prices, eliminating most subsidies, and abolishing administrative allocation of resources in favor of trade, free establishment of private businesses, liberalization of the system of international economic relations, and introduction of internal currency convertibility with a currency devaluation of 32 percent.
At the same time, a very strict income policy was introduced. Although prices were allowed to rise suddenly to equalize supply and demand, nominal wage increases were limited to a fraction of the overall price increase of the previous month. Very heavy tax penalties were imposed on state enterprises whose wages exceeded these ceilings. This policy reduced real incomes and the real value of accumulated balances that, combined with inadequate supplies of goods and services, had caused prolonged inflationary pressure. Together with the lifting of restrictions on private economic activity, import policy reform and internal convertibility, the wage-and-price policy reestablished market equilibrium.
Data as of October 1992