A Ray of Hope for Polish Economy : East Bloc: Drop in some prices is hailed. It’s seen as evidence that the new government is making gains.

U.S. Embassy officials here were pleasantly surprised early last week by a large and unexpected fall in the price of butter in Poland.

It wasn’t because of the impact on their own budgets that they were so happy. It was because the decline coincided with the arrival here of the first shipments of U.S. butter under a $108-million emergency food aid program.

“What’s happened to the price of butter is a good example of the kind of impact the program can have,” one official said enthusiastically.

How much of an impact 450 tons of American butter can have in a country of 38 million people is debatable. It works out to less than a restaurant-size butter pad apiece.

But as the diplomat noted, “starvation is not the issue” in Poland. “It’s not going to be a hard winter because of availability. What’s going to be hard is for the Pole to balance his budget.”

And whatever the reason, there is no doubt that the prices of butter, some types of meat, and a few other items have dropped by 20% or more in just the last few days, contributing to a noticeable easing here in the sense of impending economic doom that prevailed just a few weeks ago.

“There’s more optimism,” said a foreign resident of Warsaw. “Six weeks ago there was a feeling that it all might blow up.”

“There’s no sign of panic--absolutely none,” added a Polish homemaker. “All in all, I would say people behave rather reasonably. It’s a little surprising they are not losing their patience.”

Western food aid has helped increase the supply of ham and butter, even if only a little. Meanwhile, demand was reduced by earlier, huge price increases on those commodities. But more important than a lesson in supply and demand is the fact that what has happened to a few prices in the grocery stores appears to be seen by many Poles as reassuring evidence that their new, Solidarity-led coalition government may actually be able to do something about the crumbling economy it inherited.

The feeling is buttressed by a dramatic closing of the gap between the official and the free-market rates of exchange for the U.S. dollar. The free-market rate reached seven times the official rate in mid-September; last week it fell at one point to less than double the official rate.

While the reasons for this change are also debatable, the result is a much more stable zloty and a notable decline in the money-changer mentality into which Poles had been forced.

Even the weather has helped, with temperatures so far remaining relatively mild for this time of year.

This doesn’t mean that there is no hardship here, or that there is no more fear of the future. There are both--particularly for the poorest people in the society. And everyone is aware that there remains an enormously long road ahead before Poland can be economically healthy, much less prosperous.

But still, the sense of some progress being made has come much more quickly than even the most optimistic analysts here had expected. And even a glimmer of hope could be vital in preventing the kind of social unrest that many had feared would result from the painful economic restructuring on which Poland has embarked.

Members of Prime Minister Tadeusz Mazowiecki’s government have been stressing in public statements here and during official visits in virtually all major Western nations that the country needs about $10 billion in economic aid during the next three years in order to secure the process of democratization now under way. Additionally, Poland says it needs substantial relief from its crippling, nearly $40-billion Western debt.

If the Polish experiment ends in failure for lack of outside help, officials warn, it could mean disaster not only for Poland, but for the wider process of historic political change gripping Eastern and Central Europe, as well.

Western governments have, in varying degrees, been concerned that massive, ill-considered aid to Poland would only provide an economic cushion enabling the government to avoid the far-reaching economic overhaul necessary if the country is ever to hold its own in a more integrated Europe.

Shipments of butter and sorghum from the United States, and of meat from Western Europe, have already begun to arrive under assurances that the proceeds from their sale to the public will be used for projects that will further the reform effort. Among projects designated for help are a Roman Catholic Church-sponsored farm irrigation plan and a fund to seed private enterprises.

The total of about $275 million in total food aid pledged by various countries so far is one of the smallest elements in a multifaceted Western aid program being constructed for Poland.

The key element is a $700-million standby credit from the International Monetary Fund for each of the next three years. It is central because in order to qualify, Poland has to put in place an agreed set of austerity measures, and because a number of other forms of economic assistance are contingent on an agreement between Warsaw and the IMF. Diplomatic sources said they expect a deal to be reached by early next year.

A multi-billion-dollar World Bank loan hinges in part on an IMF agreement, as does the rescheduling of Poland’s debt to governments (the so-called Paris Club) and to commercial banks (the London Club).

The United States and West Germany have pledged a total of about $450 million of a proposed $1-billion “stabilization loan” from the world’s Group of Seven major industrialized democracies. The money is to help Poland stabilize its currency, which is critical to any effort at economic reform.

West German Chancellor Helmut Kohl, currently visiting Poland on a long-delayed state visit, has also promised more than $1 billion in trade credits as part of a bilateral aid agreement, and both Italy and France have pledged similar credits.

Other forms of international help include credits from Sweden to help Poland clean up its environment and financial backing by the United States for companies interested in opening businesses here.

“There really has been a response,” said one Western diplomat here, even though “one worries about trying to do this thing in a way that leads to self-sufficiency.”

In the medium term, this diplomat added, that probably means a Poland that is an important exporter of food, consumer and light industrial goods to its European neighbors--”a new northern Mexico.”

The diplomat is relatively optimistic. “Getting from ‘here’ to ‘there’ is a lot simpler in Poland than in the Soviet Union,” he noted, noting this country’s private agricultural system and ethnic homogeneity.

What may be most important, the diplomat said, is popular faith that the Solidarity government can do the job.