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Poland: Inflation Problem Has Deep Roots

Washington, 4 October 1996 (RFE/RL) -- Inflation continues to be a persistent problem for Poland because some of its causes are "so deeply rooted" that even with fund help, the government is having difficulty delivering rapid results, International Monetary Fund (IMF) Managing Director Michel Camdessus said yesterday.

Polish inflation is still running at about 17 percent per year, but should slow fall to 13 percent in early 1997, Polish Finance Minister Grzegorz Kolodko told the annual meetings of the fund and World Bank in Washington yesterday.

At a press conference after the meetings, Camdessus said one of the "key problems" for Poland was its system of wage indexation, which protects workers' wages by tying them to inflation. He said this tends to push inflation up.

But Camdessus said Poland is having "enormous success" in its overall economic reform programs. He said a country can "relatively rapidly" go from hyper-inflation to high two-digit inflation and from high two-digit to low two-digit inflation, but cutting it down to low single digits is very difficult.

Camdessus said that after talks with Kolodko and Hanna Gronkiewicz-Waltz, president of the Polish National Bank this week, he has "no doubt on their resolve to tackle" the problem. However, he said, they must get support from the Parliament to make it work. Camdessus said he believes Poland will manage to cut its inflation rate down to West European levels by the turn of the century.