POLAND: Balance-of-Payments Deficit
Poland's trad* deficit with non<onmunist countries will be considerably largerhan we previously forecast. Ve believe Warsaw has lined up sufficient financing to satisfy its needsut raising the necessary funds12 will be difficult. qm
Tho strikes lost summer, the wage settlements at the and of August,orse-than-expected harvest indicate that the trade deficit0 will now reach someillion,0 million above our prestrike forecast. This deficit will also be higher than we had thought because Warsaw seoms committed to appeasingby increasing supplies of consumer goods. Exports will suffer and imports will have to be boosted. elow-average grain harvestharp decline in the potato crop will probably require substantiallyimports of grain and processed foods, notably meat, with interest payments on the debt expected to total7 billion, the current account deficit will probably8 billion this year.
The Polish economic scene is shifting so rapidly that balance-of-payments projections are hazardous. The outlook, however, is worse now than it was last summer. We expect the hard currency trade deficit will level off at aboutillion1he current deficits, because of rising interestare projectedillion. qm}
The upward rovision in our estimate of the trade deficitseflectt
government's virtual abandonment of ita recent austerity program and consequentof rasources from exports toconsumption.
on warsaw's ability to cut drastically imports of producers' goods without causing serious disruption to the economy.
impact on productionhorterand elimination of round-the-clock work in the mines that was introduced as part of stir hi' settlements.
financing the borrowing requirements
poland's borrowing requirement this year will totalillion to cover the anticipated current account deficit8 billion, repayments of medium-and long-term debts9 billion, and probableinloans andillion. poland probably will be able to raise the needed funds. 3 billion in credits has already been raised or is being negotiated, and the remainlnqshould be easily filled,
covering the financial gaps, .billion in each year, will be more difficult.
reluctance to lend to poland has been intensified by the abandonment of the government's short-lived program. if banks refuse to continue rolling over the polishormal rescheduling effort will be required. at the endillionedium- and long-term debt was due for repayment. ultilateral rescheduling, which now seems likely, will aggravate poland's problem of findingmoney to finance the large current account deficits. MjLWM
Poland could continue to receive sufficient external financing only if several unlikely events occur:
banks, rather than face theot -acknowledging bad loanshe complex procedure ofultilateral rescheduling, will continue to roll over Poland's debt informally.
nder pressure from exporters ir. search of markets and from governmentsby economic and politicalontinue to extend government-backed loans to provide additional funds.
USSR and other substantial aid.
omaunist countries provide
Disintegrating Western confidence in Poland,makes muddling through improbable, Warsaw should be able to tap Communist governments and Western banks for one-third to one-half of theillion needed to cover the projected current account deficits. If this is right, direct Western government aid of as much asillion e necessary unless Warsawa crash program to cut imports and to divert duction from the domestic economy into exports.