POLAND: ECONOMIC STRATEGY

Created: 2/26/1982

OCR scan of the original document, errors are possible

POLAND: Economic Strategy

indicated that his economic strategy ie

to coerce enough outputrippled economyeUcZered

ith the WesTanT

i<achieve these goals, Warsaw is

agricultural deliv-

tosterity, however, risks intensifying discontent and jeopardixee Jaruseleki'e hopes of reaching an aocomvodation with the people. "aBfBK

of unrest, Polish leadersnds"PPlies to reduce Ki^Sicol^tenaion- Jaruzelski does not have this option, however, because of Poland's huge hard currency deb? and

cOunm'has to contend

oiiLl hoct*Qes of food and consumer goods,

2 Siy.AnMigCUl*tAon' 3nd the "luotance'ofto sell to the state.

anotions compound these problemsv complicating Sanctions prevent Warsaw from

^porting on credit and using export earnings to"a0ke; he amounto of vital supplies or materials and food that can be purchased rrom the west.

h-ee^outputaximum

awndustries andimports. The regime plans to run a

with the West in the first

nait2 in order to pay some debt service end reassure Western creditors. Jgft

Enforced Austerity

is relying primarily on massive retail

priceo force down living standards, absorb excess money, end correct market disorder. The price

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hikes enactedebruary on food and utilities raised the overall cost of living by more thanercent while wages were increased by only an estimatedercent. The regime also has reduced the real value of private savings by adjusting savings accounts upward by onlyercent and by crediting tho adjustment only after

Almost one-fifth of theand collective formers, craftsmen, many service employees, andnot received anyunder these measures. Private farmers, moreover, have to contend with price hikes on equipment, fertilizer and other supplies that outwoigh theincreases in prices they receive for their produots. H

Consumers also face more retail price increases on manufactured goods this year, although the government will monitor price changes by enterprises and consider further wage compensation. The impact of the additional burden nay be just as severe as the food price lncroases.

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clearly hopes that higher retail prices will reduce hoarding, shorten lines, and leave more goods available for sale. This might help to mollify consumers and give farmers more incentive to sell to the state. The price increasesebruary apparently have helped keep more goods eveilable, although some of thoprobably refleots government efforts to-put more goods onrkot to cushion the blow.

CEMA Assistance

Warsaw is sucking help from its CEMA allies tofor reduced supplies of Western materials. The poles have asked for large traderaindditional raw materials, and accelerated deliveries In order to reduce idle production capacity. Inlioy almost certainly want hard currency aeeietauce. 1

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The USSR haa been more responsive than East European countries inilllon-ruble deficit this8 ie lo"he deficitillion ruble?ut double what the Poles sought last fall.

The Soviets also have agreed to reduce machinery exports in favor of more useful goods and to provide some above-plan shipments. These concessions do not cover Poland's needs, however, and Jaruzelski will keep pushing for more help.

One concession by CEMA will help only temporarily. The CEMA countriesto help soften the impact ofarger share of planned deliverieside variety of goods2 in the first three months of the year and to let Poland defer temporarily some exports. Warsaw is required, however, to increase exports substantially from April through June and to make do with fewer imports.

Outlook

Jaruzelski is aware that his economic policyamble, requiring patience by the Polish people and Westorn creditors as well as generous aid from other members of CEMA. At best, Poland probably will only be able to pay less than half of5 billion Interest obligations due this year to private bankers, thereby keeping default an ever-present possibility.

Polish consumers may well react to furtherin their living standards by increasing resistance. The likely failure of Poland's allies to grant enough assistance will generate tensions within the Bloc. It aleo may undercut the arguments of Polish hardliners that Poland should rely completely on the East and pueh Warsaw back toward the West, team*

The combination of martial lew restrictions under declining living standards reduces the chance that any accommodation with the populace will be reached oreconomic reform be made. Compulsorydellvorles would bring the regime into conflict with private farmers end the Church. Jaruzelskl's economic policy, thus, will favortrong martial lew apparatus.

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Original document.

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