The effect of foreign indebtedness on economic development of Poland in the period of the political system transformation

Abstract

Foreign indebtedness is one of the most important problems of Poland nowadays. Until the beginning of the seventies, it was not any problem, because Poland practically did not buy on credit in Western countries. In the late seventies the indebtedness was about 1 billion USD but in 1979, it already reached 22.4 billion USD. At the beginning of the eighties, Poland ran into a trap of debts that became a basic problem in its international relations. Poland remained an insolvent country, although it serviced its debts. In the first half of the eighties Poland had no access to any financial sources. At the end of 1989 its indebtedness was almlost 41.43 billion USD. In the 1990s, a chance to solve the problem of foreign indebtedness appeared. It became possible due to political transformations and implementation of a credible and realizable economic program. In 1990-1996, Poland regulated the problem of paying its liabilities with the Paris Club, the London Club and Russia. All formal barriers blocking the access to international financial markets disappeared. Poland settled its relations with all the debtors and was able to cover its outer indebtedness.
At present the foreign indebtedness is app. 70 billion USD but, as the future member of the United Europe, Poland is regarded as a credible credit partner and, according to rating agencies, it obtains the index BBB plus. The direct impact of the foreign indebtedness consists primarily in enlarging the state budget deficit which at present is one of the most important problems of Poland. Further perspectives of decreasing liabilities of the foreign indebtedness depend on a general status of the economy, a success of reforms, a political and social situation and especially on the development of competitive export. Integration of Poland with the European Union seems to be a necessary condition to pick up a chance of the development, and at the same time, to cover its debts.