Balcerowicz's Big Bang

How finance minister Leszek Balcerowicz freed prices, stopped money printing and opened trade on 1 January 1990, ending hyperinflation at the cost of a sharp recession.

Poland began its transition with a big bang.

The situation in 1989

Hyperinflation approached 600 percent a year.
Shortages and huge debt.

The Balcerowicz Plan

Starting 1 January 1990, finance minister Leszek Balcerowicz:

Freed most prices.
Cut subsidies and balanced the budget.
Stopped financing deficits by printing money.
Made the zloty convertible and fixed it temporarily.
Opened trade.

Immediate effects

Prices jumped, then inflation fell sharply.
Shops filled with goods.
Output fell and unemployment rose.

Recovery

Poland was the first post-communist country to return to growth, in 1992.

Debt relief

In 1991, Western creditors forgave about half of Poland’s official debt, helping recovery.

The full shop

Weeks after prices were freed in 1990, Warsaw shops that had been empty filled with goods, though at much higher prices.

Thinking shock therapy failed everywhere

Poland recovered quickly and grew for decades.

Key takeaways

The Balcerowicz Plan began on 1 January 1990.
It freed prices, cut subsidies and stopped money printing.
Inflation fell but output dropped at first.
Poland returned to growth in 1992, helped by debt relief.