It is time to hold the PiS government accountable for its actions so far. In what condition does he leave public finances to his successors? What about the budget and what does Poland’s debt look like? The issue is very serious because we are talking about… Hundreds of billions of zlotys are raised and spent every yearThe consequences of which will also be borne by subsequent generations.
The latest budget update by the government of Mateusz Morawiecki assumes this This year’s expenses will exceed revenues by about PLN 92 billion, which means more than 5%. Deficit relative to GDP. On the other side Debt will exceed 49% of GDP.
The new government will find an even bigger gap, which is scheduled to happen in 2024. I’m talking about it More than 160 billion Polish zlotys. In theory, over the next 12 months, the finance minister and other prime ministers can reform finances, but in practice, the ability to maneuver key budget parameters at the last minute is very limited.
The budget for 2023 and 2024 looks much worse than it did in 2022.
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Santander
As for the budget gap predicted by the PiS government, in the last ten years or so, it was only worse in the first year of the pandemic and immediately after the global crisis that began in 2008.
The deficit this year is expected to exceed 5%. gross domestic product. In the past 10 years or so, the situation was only worse in the first year of the pandemic, and immediately after the global crisis that began in 2008.
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Santander
Public Finance. Rapid increase in disability
So far we have discussed the statistics that the government included in the budget law. What does the situation look like in numbers that actually summarize revenues and expenditures so far? Immediately before the elections, the results of the first seven months of this year were only known until July. At the time, there was a deficit of PLN 13 billion, but economists suggested that the government was hiding some information..
– This is a rotten egg for the next government that the current government is hiding – this is what the former Director of the Ministry of Finance and Prime Minister said Slavomir Dodik Institute of Public Finance. Budget data released long after the election showed that another billion zlotys were missing.
The state budget recorded a deficit of 16.6 billion zlotys after August, and after September it doubled to 34.7 billion zlotys. As noted by economists at PKO BP, the overall deficit for the next 12 months reached PLN 75 billion, the worst result since March 2021.
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BP peacekeeping operation
“The increase in the deficit is the result of a stronger increase in expenditures (the 12-month total rose 8.9% year-on-year) compared to revenues (which increased 4.2% year-on-year).. The increase in spending in September is related to, among other things, military spending (7.5 billion PLN per month),” PKO BP experts point out.
They add that the positive aspect on the revenue side includes the systematic improvement in value-added tax revenues and the gradual increase in the ratio of budget revenues from this tax to GDP. By more than 40 percent and PIT revenues are also increasing annually. Unfortunately, in the case of the ICT company, monthly revenues in September amounted to only PLN 214 million – the lowest level since June 2010.
“Worse outcomes for businesses will likely reduce revenue from this tax. Data on the central budget position in August and September are consistent with our assessment of the challenges facing the financial sector. We maintain our forecast that the fiscal sector deficit (including, among others, extrabudgetary funds) will increase in 2023 to 5.5%. GDP of 3.7 percent GDP in 2022,” we read in the commentary of PKO BP.
Public Finance. What about debt?
If we add up the deficit in subsequent years, we turn to another important element for assessing public finances, which is debt. In the case of public finance sector debt, the latest official data dates back to the end of the first half of 2023. The state’s public debt (PDP) amounted to PLN 1 trillion PLN 241.6 billionWhich means an increase of PLN 32.1 billion (+2.7%) compared to the end of 2022.
However, this is only part of the truth. General government debt (EDP debt) Taken into account, among other things: by the EU institutions it was at the same time PLN 340 billion higherthat is, we are talking about PLN 1,581.2 billion (a year-on-year increase of PLN 69 billion, or 4.6%).
The state’s public debt since the beginning of 2020 is noticeably lower than that of EDP
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Ministry of Finance
More recent information is available from the Ministry of Finance on State Treasury debt (St). At the end of August 2023, it amounted to 1 trillion 278 billion Polish zlotysWhich means an increase of PLN 39.6 billion (3.2%) compared to the end of 2022.
This debt is growing systematically, but at least the share of foreign currency debt in the total state treasury debt is decreasing.
State treasury debt is growing, but the share of foreign investors is decreasing
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Ministry of Finance
Public finances after the Law and Justice Party government. The main objection
Prime Minister Mateusz Morawiecki, responding to questions about the state of public finances, confidently claims that they are in very good shape. He, in turn, attributes the large increase in spending and larger deficits to unusual events such as the war in Ukraine. At the same time, he enumerates the extent to which the PiS government has done for the citizens by providing the anti-coronavirus shield, inflation, etc.
However, there is a lot involved in this State expenditures flow outside the budgetThis is one of the main accusations that experts make against the government.
The Institute of Public Finance, as part of the Real Budget project, has calculated this The actual deficit in 2024, after taking extrabudgetary funds into account, will be PLN 112 billion higher than shown by the government and will amount to about PLN 277 billion..
Similar estimates indicate this In 2022, the gray area accounted for up to 88%. The state budget.
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Responsible Finance Institute
Recently, there has been much talk about the threat of Poland being included in the EU’s excessive deficit measures, which could be the “kiss of death” for the new government.
The rest of the article is below the video
What is the state of public finances?
According to the Institute for Responsible Finance, “public finance as a system is currently in very poor shape.”. However, not all experts speak with one voice. Piotr Bielski, economist at Santander Bank, admits in an interview with Business Insider that he avoids clearly defining the state of public finances as “good” or “bad.”
-There’s no doubt we’ll get it this year A very large deficit. The government and the Ministry of Finance acknowledge this. It will exceed 5%. GDP, which means it will be higher than the output from the last adjustment. From a financial stability point of view, this is not good news, but it also has some advantages – Belsky notes.
Government deficits and expansionary policy support the economy, and it must be recognized that the global situation and global crisis often require non-standard measures. In theory, there is scope for this, because e.g. It is clear that Poland’s debt relative to GDP is still below the EU average.
Poland’s debt is low compared to the vast majority of EU countries
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Ministry of Finance
ING Bank Chief Economist Śląski does not view the state of public finances in black and white. Rafael Beneke admits this in an interview with Business Insider Poland has a low debt-to-GDP ratio and some fiscal metrics are at safe levels. At the same time, he points out that Borrowing needs for 2023/2024 have jumped to unprecedented levels. “It’s a big challenge, a big threat,” he warns.
The result of this will be, among other things: the need to request money from foreign investors. However, this will fall on the new government.
author: Damian Swoomski is a journalist at Business Insider Polska
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