The paper describes the changes in the servicing of the Polish foreign debt throughout the 90s, against the background of how the balance of payments developed - as well as the current situation. The latter part of the paper deals with debt servicing beyond 2000 and the resulting goals for the country's economic policy.

Following considerable debt write-offs negotiated with the Paris Club (1991) and the London Club (1994), the cost of debt servicing was reduced significantly. This contributed to fast economic growth in Poland, which in turn helped improve the debt figures. However, growth and the increased openness of the Polish economy led to a dynamic increase in foreign trade, particularly imports. Since exports did not grow at the same pace, the negative current account balance worsened. This issue is becoming particularly burning now in the face of the pile-up in interest and principal payments of expected after 2000.

Given the weakness of the Polish export capacity, both imports and debt servicing expenditure must be offset by capital account flows. The inflow of capital can take the form of either portfolio investment, foreign direct investment or debt incurred in international markets. Of critical importance is the stability of involvement on the part of the capital, that is, its time horizon and the quick withdrawal option. Long-term capital prevails in Poland, while the role of speculative (short-term) capital limited. This guarantees a fairly secure source of financing the current account deficit as well as debt servicing. It is important, however, to keep up activities aimed at improving the competitiveness of Polish exports.