Shock therapy and the end of hyperinflation

Poland entered 1990 with inflation running at more than 50% per month, the product of decades of central planning, chronic shortages, and a currency that had lost any real anchor. The stabilization plan launched on 1 January 1990, often called shock therapy, combined fiscal and monetary austerity, price liberalization, and a sharply devalued but newly convertible zloty, with the banking system enforcing tight credit to state enterprises that had previously borrowed almost without limit. The effect on prices was immediate: monthly inflation fell from over 50% in late 1989 to around 4% by mid-1990, and shortages that had defined the late-communist economy largely disappeared within months as markets began clearing at the new prices. The transition was not painless; output fell sharply in 1990 and 1991 as unprofitable state firms lost access to cheap credit and had to adjust or close, but the swift return of price stability laid the groundwork for Poland's subsequent two decades of EU-accession-era growth. The IMF later cited Poland's 1990 program as one of the most consequential stabilizations of the post-communist transition.