WESTERN ASSISTANCE FOR POLAND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90T00103R000400500001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 27, 2016
• Document Release Date: January 7, 2014
• Sequence Number: 1
• Publication Date: September 20, 1989
• Content Type: REPORT

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Central Intelligence Agency
Washington. D. C.20505
DIRECTORATE OF INTELLIGENCE
20 September 1989
Western Assistance for Poland
Summary
We estimate that a Western assistance program
designed to maximize the chances of success of a Polish
reform program probably would require about $5 billion
over the next three years. The US probably would have to
count on contributing about twenty-five percent of the
tab--$1.25 billion--to win our Allies' agreement to make
up the difference.
This typescript was prepared by the Office of European Analysis.
Comments and queries are welcome and may be directed to t
Director, Office of European Analysis
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EUR M 89-20174
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DISCUSSION
Any effective Western economic assistance program for Poland
must serve both economic and political ends. It must be large
enough to help the government soften the economic pain of what will
be in any event a distressing process. Perhaps more importantly,
it must be packaged in such a way as to have the maximum impact on
the mood of the Polish people. A psychological transformation from
apathy and cynicism to hope is essential to the success of reform.
Western assistance also must be keyed to an effective Polish
reform program. These reforms must reduce the government budget
deficit, eliminate consumer and industrial subsidies, allow market
forces to determine prices, permit bankruptcies of inefficient
enterprises, provide for real interest rates, and let the expected
rate of return affect investment decisions.
Tied to aid which could be obtained from multinational and
other sources, this could form an impressive package. Poland could
receive:
$1 billion per year from the International Monetary
Fund;
$325 million per year from the World Bank for
development loans;
Rescheduling, and perhaps consolidation, of all loans
to the Paris Club with payments delayed at least
three years, and a similar payments moratorium with
commercial banks would amount to roughly $4 billion a
year.
This would bring the total package up to a bit more than $20
billion.
The additional Western assistance amount should be divided
into two packages. The first part would be $1.5 billion of
agricultural assistance, both food stuffs and agricultural inputs,
that would be provided the first year as the economy adjusts to
free-market prices on food. The remaining $3.5 billion would be
provided equally over three years and should be used to help Poland
finance the transition to a market economy.
The total aid package would allow Poland to increase its hard
currency imports by roughly $12 billion over the three-year period.
In the earliest year this sum would be spent largely on consumer
goods, but the West needs to press Poland to sharply increase the
allocation to investment goods in later years.
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We believe the West Europeans would be willing to fund the
bulk of the additional $5 billion--on top of debt rescheduling?as
long as the Poles were implementing fundamental reforms. The West
Europeans realize their political and economic stake in the East is
greater than ours and would therefore expect a major role in
formulating the exact contents of the program. The United States
would probably have to pick up about a quarter of the tab--a bit
more than $400 million a year--to obtain sufficient commitments
from our Allies.
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The EC is open to the idea of further food aid,
although Embassy reporting indicates EC officials
want to shift the emphasis to food production items
such as fertilizers and seed.
We believe the Germans could be counted on to provide
over half the non-food aid. Although bureaucratic
and political squabbling has delayed conclusion of
Bonn's aid package for Warsaw,
increasing pressure within the West German
government for a generous offer./
/ We believe that Bonn
might prefer casting its contribution as part of an
international initiative, giving the government more
protection from criticism by some domestic groups
about "excessive generosity" to the Poles.
Nonetheless, Bonn undoubtedly will remind the West
that assistance to Poland should be part of a
comprehensive program including Hungary.
A US initiative for more aid would pressure Paris and
London into backing up their rhetoric on the need to
seize the "historic opportunity" in Poland with
money. Annual outlays of about $100 million each are
possible, in our view. Some of the smaller European
countries that have been in the vanguard of the food
aid program--Austria and Switzerland--also would
participate on a smaller scale.
Japan is likely to be one of the last to commit to
such a program because it does not see Poland as
important to its economic and political interests.
Nonetheless, Tokyo would probably chip in $100
million in credits tied to Japanese exports./
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