MARSHALL PLAN FOR POLAND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R000601460025-3
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: December 21, 2016
• Document Release Date: August 5, 2008
• Sequence Number: 25
• Content Type: REPORT

Approved For Release 2008/08/05: CIA-RDP84B00049R000601460025-3
UitlltN I IAL
"MARSHALL PLAN" FOR POLAND
A Cost Analysis
Introduction
This analysis of the costs of significant economic
assistance to Poland follows the convenient pattern of
(1) establishing a Base-Line, or minimal, program which
would aim to stabilize the Polish economy at more or less
its present depressed level, then (2) considering an
increment to the base-line program that could put the
Polish economy on a path of renewed growth and recovering
standards of living. The Base-Line program does no more
than cover the hard-currency financial gaps which the
Poles themselves have projected as needed to support
their economy in a decidedly lackluster condition, at
least for the next year or two.
The analysis assumes adequate burdensharing by the
Allies. In a total aid package, U.S. shares ranging
from 10% to 30% can be justified, depending on the
formula used. This analysis uses a figure of 20% as a
reasonable compromise between these extremes, regarding
which there are inter-agency differences of view.
The analysis focusses on the incremental costs of
any new program. Thus, it assumes that debt rescheduling
along the lines already agreed to by official creditors
for 1981 (90% of principal and interest) will take place
in any event (whether by agreement or by Polish default)
and therefore represents "sunk" costs independent of any
new assistance program. Rescheduling by the private banks
(95% of principal only) is handled similarly.
The Base-Line Program
Poland's most recently projected financial gaps for
1981 and 1982 amount to $0.8 billion and $3.8 billion,
respectively. At least $350 million of the former figure
has to be seen as a potential bail-out of the banks (mostly
European) for interest payments due in 1981.
Classified by R. A. Cornel l
O Declassify ? Review for
Declassification on 12/24/87
CNIDENTIAL
State Dept. review completed
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After 1982, the gap is expected to decline to about
$2 billion by 1985. Because debt rescheduled in 1981 will
start falling due after 1985, Poland's financial gap will
increase again in 1986 and beyond, unless there is then a
rescheduling of previously rescheduled debt. Leaving the
years of ter 1985 out of consideration, the costs of a Base-
Line or minimal assistance program for Poland over the
medium term, by calendar year through 1985, can be estimated
as follows:
New Money Beyond ($ Millions)
Costs of Debt
Rescheduling 1981 1982 1983 1984 1985 Total
Total Program .800 3,800 3,000 2,500 2,000 12,100
U.S. Share (20%) 160* 760* 600 500 400 2,420
* Likely to be concentrated in FY 1982, for a total of $920
million.
The Incremental Program
There has been no definitive analysis of what Poland's
requirements might be, should the Western allies decide to
go beyond the basic balance of payments support envisioned
in the Base-Line sort of program outlined above. In its
current depressed state, however, the Polish economy has
considerable absorptive capacity for (1) inputs to agricultural
production, (2) raw materials and intermediate goods for manu-
facturing, (3) spare parts and equipment to replace capital
facilities damaged or run down over the past year, and (4)
carefully selected new investment. Thus, an incremental
program of $3 billion to $5 billion annually through 1985
likely would not be constrained by Poland's absorptive
capacity and would stimulate the economy powerfully. Perhaps
10 percent of the total should be allocated to administrative
costs, as effective economic management will be essential for
a successful program; the Poles have demonstrated in the
past that they do not possess such management capability.
The U.S. share of the program, at 20%, would be $600 million
to $1 billion annually.
CONFIDENT IAL
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Combined Costs
With the Base-Line and Incremental programs combined,
costs to the USG, by fiscal years, through 1985, would be
as follows:
($ Billions)
1982 1983 1984 1985 TOTAL
1.52-1.92 1.2-1.6 1.1-1.5 1.0-1.4 4.82-6.42
Other Key Considerations
-- A highly publicized Western program, especially one of the
incremental variety, could well induce the Soviets to reduce
or cease their support of the Polish economy, which amounts
to $2 billion to $3 billion annually in terms of real
resource transfers. This would leave the West with all
its costs and few if any of the expected benefits of Polish
economic resurgence; the West would simply be assuming costs
previously borne by the USSR.
-- Without institutional reform of the Polish economy, by the
Poles themselves and with Western managerial and organizational
help, any assistance effort by the Allies would be largely
wasted. It would simply prop up Polish per capita incomes
for a few years, leading to new crises when the program ended.
This is, in effect, what happened to Poland in the 1970's,
when skyrocketing borrowing provided analogous income tranfers
from the West.
-- All US assistance could and should be tied to U.S. exports,
but the Allies are likely to do the same, so that there
will be no feedback demand for US exports from Allied
assistance.
-- Some "bail-out" of private creditors cannot be avoided,
especially initially.
-- A coordinated Allied program, especially at the incremental
level, could well restore the confidence of private lenders
and lead to a resumption of private credits to the Poles.
This could reduce the need for official assistance. Quanti-
fication of the extent of possible new private lending would
be sheer guesswork. Confidence will return only over time.
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uut rium i INL
-- Any assistance under either the Base-Line or the Incremental
program should be highly concessional. Poland would be hurt
rather than helped by new short- or medium-term debt. From
a cost.analysis perspective, this implies heavy current
budget outlays that would not be recouped for many years.
-- A resurgence of the Polish economy implies increased exports
to the West. Western countries will need to be prepared
to maintain open markets for Polish goods, which implies
policy-level resistance to the inevitable charges of dumping
and market disruption that the US and other governments will
face.
Classified by R. A. Cornell
O Declassify n Review for
Declassification on 12/24/87
CONFIDENT IAL
Approved For Release 2008/08/05: CIA-RDP84B00049R000601460025-3