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Wednesday, May 22, 2024

25 funds of Prime Minister Morawiecki – hundreds of billions of zlotys spent, hiding the deficit

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The Agricultural Protection Fund being created is the 25th fund established under the rule of PiS. There are already PLN 324 billion in funds outside the supervision of the Sejm. The creation of various funds is criticized by the Supreme Audit Office and economists, who claim that in this way the government blurs the true state of public finances.

According to the content adopted on May 9 the Act on Agricultural Protection Funds (it was a government project), this fund is to be used to pay compensation to those farmers who will not receive payment for agricultural products sold to purchasing or processing companies, and which have become insolvent. The government predicts that in 2024, the proceeds to the fund from payments from purchase and processing companies (0.125% of the net value of purchased agricultural products) will amount to approx. PLN 63 million. However, in 2023 the Fund’s account will be credited with a subsidy from the state budget in the amount not exceeding PLN 50 million, and in 2024 in the amount not exceeding PLN 100 million.

25 new funds from the PiS government

As we have counted, the Agriculture Protection Fund will be the 25th special fund established under the PiS government since 2015. Apart from one – the Civil Society Support Fund from 2017 – all of them were created when Mateusz Morawiecki was already prime minister.

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Funds created under the United Right governmentConcrete24

Six of them were established in 2019, and six more in the following year, including four related to financing activities related to the effects of the COVID-19 pandemic. As of 2021, ten new funds have been created.

13 new earmarked funds

The funds established, the purpose of which is to finance various expenses, can be divided into two groups. The first is the so-called state earmarked funds, created on the basis of separate acts, the revenues of which come from public funds, and the costs are intended for the implementation of separate state tasks. They are managed by the minister or other public administration body indicated in the act. Cash is stored in a bank account specially separated for the fund at Bank Gospodarstwa Krajowego. The financial plans of each fund must be included in the budget act, which means that the parliament has control over them.

In Appendix No. 13 to the budget act for 2023 financial plans of 37 state earmarked funds are included. On their basis, we can conclude that the planned expenses 13 new Morawiecki’s earmarked funds will exceed PLN 33.7 billion (these expenses are recorded in each financial plan in the section “Tasks resulting from the act establishing the special-purpose fund”). The largest amount from the state budget – over PLN 25.4 billion – will be spent by the Solidarity Fund, the purpose of which is “to provide social, professional, health and financial support to people with disabilities, as well as to provide financial support to pensioners”. From this fund, the government pays an additional pension benefit – the so-called thirteenth pension.

Expenditure in 2023 of earmarked funds established since 2015Concrete24

Over PLN 3 billion goes to the implementation of the tasks of the Medical Fund, from which treatment with innovative therapies is financed, also abroad; PLN 2.6 billion will be allocated by the Indirect Issue Costs Compensation Fund for payments to companies that have lost due to the increase in energy and gas prices; PLN 1 billion from the Price Difference Payment Fund for energy companies that lost as a result of freezing energy prices. PLN 4 million is earmarked for payments from the Protective Vaccination Compensation Fund – it was created during the pandemic and is aimed at treating severe side effects of COVID-19 vaccinations. Only PLN 1.4 million was allocated for the implementation of the tasks of the National Fund for the Protection of Monuments.

12 off-budget funds

The second group of special funds are those that are called off-budget funds. They can be created on the basis of acts, such as the COVID-19 Counteracting Fund, or on the basis of resolutions of the Council of Ministers, such as the Polish Governance Fund. Their expenses are not included in the state budget, their financial plans are not published or controlled by the parliament.

For 18 such funds, currently administered by Bank Gospodarstwa Krajowego, 12 was founded during the rule of Mateusz Morawiecki. Four, including the largest one – the COVID-19 Counteracting Fund (and three funds aimed at compensating tourist companies) were established in 2020 during the pandemic. The COVID-19 Counteracting Fund is the largest off-budget fund of the current government – as we wrote in Konkret24, in 2022 almost PLN 52 billion was allocated for expenditures from this fund. Other largest expenditures include: the Armed Forces Support Fund – over PLN 49 billion, the Ukraine Assistance Fund – PLN 10 billion, the Government Road Development Fund – PLN 6.8 billion. Another such off-budget fund will be the Agricultural Protection Fund, which is to be managed by the National Center for Agricultural Support.

In your analysis Polish Economic Institute (government institution, supervised by the Prime Minister) estimated that “total public expenditures implemented through extra-budgetary funds in 2022 reached PLN 324 billion” (original spelling, bolded by the editor). PIE also informed that other countries are also reaching for this type of financing, e.g. Italy, where the government will have 24 extra-budgetary funds by 2025, or Germany, which will use extra-budgetary funds in 2022. spent EUR 120 billion.

Pushing expenses beyond budget

It is the creation of off-budget funds by the government that is criticized by economists and the Supreme Audit Office. During the debate on the transparency of public finances organized at the NIK July 8, 2021 President Marian Banaś stated that “the analysis of the implementation of the state budget carried out by the Supreme Audit Office showed that last year the government used unprecedented mechanisms to push expenses beyond the budget”.

Twice in the analyzes of the implementation of the state budget for 2020 and 2021, the NIK indicated “the increasing scale of financing certain public tasks in a way that disturbs the transparency of budget implementation” by increasing extra-budgetary expenditure.

Mateusz Walewski, the chief economist of BGK, argued against the allegations of hiding public debt in off-budget funds. John wrote November 29, 2022 for the “Rzeczpospolita” daily, “all funds held by BGK are part of the debt of the general government sector (according to the EU ESA2010 methodology). The values ​​of liabilities of these funds are monitored on an ongoing basis by the Ministry of Finance and reported to the European Commission.”

Off-budget funds are criticized by the economists of the Civic Development Forum (FOR). In a study from January this year on the budget act for 2023 entitled “Necessary changes to increase transparency in the draft budget act for 2023” wrote that “in 2023, as in the previous year, it is assumed that various tasks of the state will be financed through the use of instruments remaining outside the public finance sector in terms of the Public Finance Act. This gives a false picture of both the deficit and the sovereign debt. In addition, the funds spent in this way are completely beyond Parliament’s control. This applies in particular to expenses made by funds invested in Bank Gospodarstwa Krajowego” (original spelling). And as we read further, “the omission of these funds in the budget act limits the principle of transparency of public finances, and also limits the control function of the Parliament in the field of determining state finances.” .

Two months after publication of the FOR study, March 6 Prime Minister Mateusz Morawiecki informed that the Ministry of Finance will prepare a draft act consolidating public finances. The main objective is to liquidate off-budget funds created in recent years.

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