Poland, which led regional liberalisation, freed its central bank to formulate and

conduct monetary policy without parliamentary approval of detailed credit plans

in 1990. A Monetary Policy Committee, composed of central bankers, makes

monetary policy. An annual outline of monetary policy must be presented to the

cabinet for informational purposes. The 1990 legislation, charged the Bank of

Poland with advising the government on budget policy appropriate to maintain

monetary stability and limited lending to government to 2percent of the

government’s budgeted expenditures. Legislation charged the bank both with

protecting currency stability and with supporting the government’s overall

economic objectives. Legislation in 1991 increased the bank’s supervisory

authority over commercial banks. Legislation the next year eliminated the cap on

central bank lending to government and made deficit financing subject to

negotiation between the minister of finance and the Bank of Poland. This placed

a greater burden for maintaining independence on the negotiation and leadership

skills of the Bank of Poland governor, Hanna Gronkiewcz-Waltz. She lived up to

the challenge, successfully withstanding political pressures for expansionary

policy. The governor is appointed by parliament and can be recalled on

unspecified grounds.