The principal novelty of this paper lies in offering explanations of changing priorities and of the stop-go-stop sequence of policies in Poland in the years 1990-1991. The paper suggests that, in the first year of the reform, achieving price stability was secondary to the following three other aims: a substantial increase of the international reserves (large up-front devaluation required), a drastic reduction of the share of dollar currency in the total money supply (large monetary expansion is required) and a major improvement of the quality of the price system (drastic increases of some administrative prices needed). It is shown that the money supply was effectively the only nominal rate and the incomes policy became nominal anchors only in the second year of the reform. The paper also discusses the causes of the budget crisis in 1991 and the relationship between the quality of the macroeconomic control and the pace of structural change.
