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. Last Updated: 07/27/2016

Poland's Debtors Approve Buy-Back

WARSAW -- Poland will buy back a quarter of its debts of more than $13 billion as a result of a deal with nearly all of its Western commercial-bank creditors, Finance Ministry officials said Monday.


Officials said Poland will exchange almost 75 percent of its commercial debt into five bonds and begin regular payments from May 1995.


"After l4 years of abnormal financial relations with the outside world, we will be signing the final agreement in a few days' time," Finance Minister Grzegorz Kolodko said on state television over the weekend.


The move will be a big shot in the arm for Europe's fastest-growing economy, whose strength is services and whose industrial base is still dominated by aging, obsolete plants.


Under the agreement, backed by 495 of the 500 commercial banks Poland owes money to, Warsaw will be allowed to buy back one-quarter of its main debt at 41 cents to the dollar and turn the remainder into bonds.


Poland's indebtedness to the commercial banks comprises more than $8 billion in principal debt, about $4 billion in unpaid interest and more than $1 billion in trade credits.


Finance Ministry sources say the $2 billion needed to buy back the debts and repay interest would come from Poland's monetary reserves and loans from the World Bank and International Monetary Fund.


Kolodko called the agreement due to be signed on September 13 a "historic moment," which followed four years of tough negotiations.


Poland's debts were generated in the 1970s as a result of a borrowing spree by Communist leader Edward Gierek who sought to modernize the country with huge infusions of Western credits. Except for occasional interest payments seen mainly as goodwill gestures, Poland virtually stopped servicing its debts in the 1980s.


Following the country's dispatch with authoritarian Communist rule in 1989, Finance Minister Leszek Balcerowicz's economic austerity program introducing free market reforms won IMF accolades.


In 1991, the Paris club of Western creditor nations agreed to forgive half of Poland's $30 billion non-commercial debt. (Reuters, AP)