POLAND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R001100940001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 22, 2016
• Document Release Date: August 20, 2010
• Sequence Number: 1
• Publication Date: November 13, 1984
• Content Type: REPORT

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Sitrep
13 November 1984,
Poland
The October 23-24 Paris Club meeting between Poland and
Western government creditors produced little progress toward a
rescheduling agreement. Warsaw demanded 100 percent rescheduling
over 14 years with a 7-year grace period of principal and
interest due. in 1982-1.985, includi.ng.p.ayments, under the1981__
rescheduling agreement. The Poles also asked to pay only 40
percent of the interest that would come due in 1985 under a new
rescheduling agreement, 60 percent in 1986, 80 percent in 1987,
and that the remainder be capitalized. In 1988 and thereafter
all interest would be paid. Concerning arrears from the 1981
agreement, Warsaw proposed that 30 percent of the moratorium
interest due in 1982-1983 be paid as previously agreed but that
50 percent of the 1982-1983 payment and 100 percent of the 1984
moratorium payment be capitalized. The 1981 agreement would be
iced fully in 1985 and thereafter.
Paris Club
countered with an offer to reschedule
95 percent of principal and interest due in 1982-1984 over 5
years with a 4-year grace period beginning January 1, 1984. The
remaining 5 percent would be paid in 1985. Overdue interest on
the 1981 agreement would be paid according to the agreement
reached earlier this year which-specifies that 30 percent be paid
when the multilateral agreement is signed and 50 percent when
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bilateral agreements are concluded. Warsaw already had to pay 20
percent as a precondition for resuming negotiations. The
creditors also asked that rescheduled sums be subject to interest
at market rates and that all creditors be treated equally. The
Paris Club again rebuffed the Poles' request for new credits.
Although the Polish delegation expressed displeasure with the
Paris Club offer, they privately hinted that some flexibility in
their demands was possible at the next meeting scheduled for the
week of November 26.
During recent joint economic talks, West German officials
implied to the Poles that Bonn supports generous terms for
rescheduling Poland's debts at the Paris Club and favors Polish
membership in the International Monetary Fund
Ithe West
German government probably would not approve new official credits
for Warsaw, but the two countries have agreed to reopen
early next year a joint economic commission that has not met for
more than five years. Bonn, however, does not seem willing at
the present time to take the lead in pushing IMF membership or
generous rescheduling terms for Poland.
Warsaw has overcome internal
opposition to IMF membership and is considering a direct approach
to the Fund about reviving its application. however,
the Polish government does not have a full
appreciation of the implications of IMF conditionality,
particularly reform of the financial sector where many changes
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are needed. This could lead to a stalemate in membership
negotiations which would damage further Poland's attempts to
improve its image and creditworthiness with the banking
community.
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Yugoslavia
The US Embassy in Belgrade reports that Yugoslav officials
meeting with embassy representatives of 17 Western governments in
late October requested a multiyear rescheduling of debt maturing
in 1985-88, the same proposal they presented to commercial bank
creditors in September. Belgrade requested a 10-12 year
rescheduling period with 5-6 years grace and lower interest rates
than those contained in previous packages. The Yugoslavs also
-
indicated that they wanted to avoid a new IMF standby program,
hoping that an IMF consultative role would placate creditors.
The governments, however, insisted that negotiations on a new IMF
program be initiated before meeting with the Yugoslavs later this
month.
Belgrade has begun to soften its stand according to embassy
and press reporting. Minister of Finance Kiemencic insisted that
Yugoslavia's request for a multiyear rescheduling is not
negotiable, but it may make concessions on other points.
Yugoslavia apparently is moving towards acceptance of IMF standby
agreements for 1985 and 1986, as well as continuing Fund
involvement during the balance of the period for which Belgrade
is seeking to reschedule its debt. But Yugoslav officials stated
that they would concede no need for standby agreements after 1986
as long as Yugoslavia continues to achieve balance of payments
surpluses. Belgrade also has expressed willingness to modify
earlier demands that previously_rescheduled 1983-84 maturities be
refinanced in a new agreement.
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Some commercial creditors believe that a modified multiyear
rescheduling of Yugoslavia's private debt will be approved, but
members of the ICC (International Coordinating Committee)
representing Yugoslavia's commercial creditors are virtually
unanimous in their refusal of a Yugoslav request to repay only 10
percent of the principal maturing in 1985. They are also opposed
to the inclusion of any new credits, and many prefer a series of
annual rescheduling arrangements--both to--ensure Yugoslav. -
compliance with its IMF program and to ensure comparability of
treatment of Western creditor banks and governments. Although
Belgrade has shown some new flexibility and stated its intention
to conclude an agreement before the end of the year, unresolved
issues may make timely conclusion of a rescheduling agreement
difficult.
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East Germany
The East German foreign trade bank has asked the Luxembourg
subsidiary of West Germany's Deutsche Bank to arrange a
consortium for a 6-year credit of $150 million to be signed
before the end of the year, according to press reports. The
group is to contain wide international participation, and West
German banks are to provide only a small share of the loan. The
West German government apparently is not involved in the
negotiations and will not guarantee the loan.
such a credit
request would be viewed favorably by Western banks. We expect
the deal to be concluded on terms favorable to East Berlin.
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