There are no ready exchange rate solutions for the countries aspiring to the EU. At any event, for those countries, Poland amongst them, the exchange rate will continue to be an important instrument and measure of success in their greatest venture of decade - that journey towards the joint European currency system. However, getting closer to the goal will automatically solve the current dilemmas of monetary policy, including exchange rate problems. Although Poland is among the countries qualifying for future membership, the financial market will continue to perceive it an emerging economy, with all its consequences for the internal macroeconomic policy.

Thus the choice of domestic macroeconomic strategy capable of meeting the external and internal pre-accession challenges becomes crucial. Some of the standing issues of financial macro-stabilization - which might even gain in urgency - include that fundamental dilemma of monetary policy, the credibility vs. flexibility trade-off. Then there are the exchange rate problems, notably the clash between the efforts to curb inflation and the need to boost the economy's external competitiveness. The difficult choices Polish exchange rate policy will soon face become all the more obvious in the light of the tasks set out for the aspiring countries by the Eurosystem authorities. These tasks include the simultaneous implementation of convergence in real and nominal terms.

Polish monetary policy, including exchange rate policy, will be seriously constrained by the imbalance in the country's external payments. A current account deficit is sustainable provided the appropriately restrictive monetary and fiscal policy. Of crucial importance here is the financing structure of the current account deficit, especially the structure that will develop after the privatization process is completed.

The strategy of monetary policy should therefore be highly flexible, adequate to the challenges of the pre-accession period. For the monetary authorities to remain credible - a necessary condition for an effective implementation of the inflationary targets - it should be combined with the proper fiscal policy.

In the history of the zloty exchange rate policy so far, various systems have been in place - ranging from a fixed exchange rate to the present flexible regime. It is to be emphasized that the changes to date have been evolutionary. The gradual relaxation of the exchange rate policy created conditions for the development of the domestic foreign exchange market, which in turn greatly enhanced the Polish financial sector. The measures taken so far by the Monetary Policy Council strongly confirm this exchange rate policy strategy. The "Medium-Term Strategy of Monetary Policy 1999-2003" defines clearly the role and conduct of the exchange rate policy, emphasizing that "the strategy of directly targeting a pre-determined inflation level will be implemented under an increasing flexibility of the exchange rate (...) This will allow the market rate to approximate the equilibrium rate, prior to its new fixing within the framework of ERM 2".