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The government is preparing for a hoax with Poland’s debt? Economists reviewed the Prime Minister’s plan

The government is preparing for a hoax with Poland's debt?  Economists reviewed the Prime Minister's plan

The government wants to exclude from the fixed spending rule funds earmarked for lowering gas and energy prices, as well as exclude from the bank tax base BGK and PFR bonds and repurchase transactions (a financial transaction consisting of the sale of a security and a simultaneous obligation to buy it again at a specified date in the future).

The government wants to increase the deficit this year to decrease next year

According to the new government bill, in 2022, the following will be excluded from the rule:

  • Supporting entities affected by the energy crisis or ensuring energy security,
  • support beneficiaries, particularly old-age and disability pensioners, in connection with increased inflation,
  • Financing the armed forces.

The amount of these expenses according to the project Currently unselectable.

Economists at Bank Santander Polska point out that the energy price freeze law, which the president has already passed and signed into law, excludes from the spending base limit in 2022 and 2023 the spending of special-purpose state funds and funds managed by the BGK and the National Environmental Protection and Water Management Fund. We’ve written more about it here.

At that time Sławomir Dudek of FOR and the Warsaw School of Economics strongly criticized the actions of the politicians.

This is a big boom. scandal scandal The government not only shows the EU “Lechuca gesture”, but also exposes us to the British scenario, that is, by destroying the financial resources of our country, it will lead to a sharp weakening of the zloty and an increase in bond yields. We are approaching disaster at our request, he said.

Frequent changes in the spending rule and the ease with which they are introduced by law means that Mr.It is not a credible financial base in the eyes of investors And it is not an effective tool that guarantees a limit on the growth of budget expenditures – they explain.

The government knows it’s going to be tough

What might the latest amendment to the law mean? The government is clearly providing a fiscal cushion for next year and knows that the market will be very demanding at that time. Moreover, by amending the Public Finance Law, the government avoids the need to amend the 2022 Budget Law.

The emergence of the new proposal indicates, in our opinion, that the Ministry of Finance “Paving the way” for a significant increase in the fiscal deficit this yearWhich could be a way to “mitigate” the difficult year of 2023, Santander economists explain.

After two quarters of 2022, the fiscal deficit balance was only -1.5%. GDP, but – as bank specialists write – There will likely be an increase in the deficit in the second half of the year, especially outside the central budget.

According to them, the next change proposed by the government is to facilitate the financing of the deficit and reduce its costs.

Matthews Morawiecki’s team Plan Because it expands the possibility of reducing the tax base of the bank o The value of the bonds guaranteed by the state treasury (so far the reduction was only related to Treasury bonds) and o The value of treasury bonds used in repurchase transactions. The aim is to reduce the costs of financing the issuance of bonds secured by the state treasury (mainly by the PFR and BGK) and to develop the secondary repurchase market.

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