Olga Szczepańska, Dobiesław Tymoczko
Liberalization of capital flows in Poland and forward contracts as operations evading binding foreign exchange control regulations

On 1 January 1999, the new Foreign Exchange Law liberalizing capital flows became effective. It constitutes the next step into Poland's integration with the European structures, and meets the obligations arising from Poland's membership in the OECD. There is a considerable quality change in comparison with previous regulations. First of all the zloty was made equal with convertible currencies. In general the Foreign Exchange Law is based on the freedom of foreign currency transactions with nonresidents, while its individual articles list transactions that require prior individual foreign exchange permit. It is mostly the case of short-term capital transaction; current account transactions have been fully liberalized. The article discusses the level of liberalization of individual balance of payments components.

Imperfect by its very nature restrictions of the freedom of capital flows are not, however, able to eliminate fully operations that are most dangerous for each economy - speculative transactions. Derivatives (swaps, NDFs, etc.) are perfect instruments that allow financial markets to evade foreign exchange restrictions. In 1998 we noted a visible speculations on the increase of the zloty rate through forward transactions. Mechanisms of such operations, their effects and possible directions of the segment development are discussed in the second part of the article.

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