Poland’s transition to a market economy was turbulent. External debt was among the most pressing problems, reaching nearly 70% of GDP in 1991. One proposed solution was the Foreign Debt Service Fund (FOZZ). Officially, its job was to help service Poland’s debt. Unofficially, it was meant to buy that debt back at a fraction of its value. Instead, the money vanished into insiders’ pockets.

The debt spiral started in the 1970s, when the communist government decided to modernize the country with Western loans. The plan failed because central planning made the investments inefficient, and demand for Polish exports was weak. Poland’s free-currency debt grew from just under 1 billion USD in 1971 to about 22.4 billion USD in 1979

FOZZ was formally created in February 1989. Janusz Sawicki, deputy minister of finance, chaired its supervisory board, while Grzegorz Żemek served as director general. In 1988, Bolivia had bought back almost half of its commercial bank debt, but as Jeffrey Sachs pointed out, such a strategy tends to increase the price of the remaining debt. Therefore, the plan was to carry out the buyback in secret, through intermediaries, which were supposed to buy Polish debt at a discounted price, allowing the state to retire it.

The first person to discover irregularities at FOZZ was Michał Falzmann, a tax inspector. While auditing a company called Universal, Falzmann found that it was being used to siphon money out of FOZZ. In April 1991, he joined Poland’s Supreme Audit Office (NIK) to help investigate the fund. Two months later, the report was ready. It outlined a wide range of abuses, including many undocumented transactions. During the investigation, Falzmann had reportedly received threats. In July 1991, he was removed from the probe. The next day he died of a heart attack at the age of 37. NIK president Walerian Pańko also died suspiciously, in a car crash days before he was to present the report to parliament.

Prosecutors estimated that the state lost around 350 million PLN through FOZZ, although the real figure was likely higher. During the trial, Żemek said that he had acted on the orders of Poland’s communist secret service. Today, many mysteries surrounding FOZZ remain unsolved. The scandal is often described as the biggest in democratic Poland. That is why many call it matka wszystkich afer, “the mother of all scandals.”
Works Cited
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"30 lat temu zmarł Michał Falzmann. Jako pierwszy badał aferę FOZZ." Onet Wiadomości, 18 July 2021, wiadomosci.onet.pl/kraj/30-lat-temu-zmarl-michal-falzmann-jako-pierwszy-badal-afere-fozz/ek7zz6s. Accessed 18 Oct. 2026.