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Budget 2021 – amendment. Economists comment on the government’s decision

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The Council of Ministers adopted the amendment to the state budget for 2021. Additional money is to be allocated to health care, roads and railways as well as water and sewage investments. Wyborcza.pl writes that “the state budget is flooded with an avalanche of additional billions of zlotys.” According to financial analyst Piotr Kuczyński, “spending surpluses now may signal that elections are fast approaching.”

On Tuesday, the Council of Ministers adopted the draft act amending the budget act for 2021 along with the resolution on the draft act amending the budget act for 2021. The reason for the changes in this year’s budget – as Prime Minister Mateusz Morawiecki pointed out – is significantly higher than originally planned and may as much as PLN 80 billion.

At the Tuesday press conference, the head of government announced that due to the good condition of the budget, inter alia, additional PLN 1 billion will go to health care, over PLN 10 billion for roads and railways, PLN 4 billion is to go to local government units for investments in water supply, water supply and sewage systems. It is expected that approximately PLN 2.7 billion will be allocated to an incentive fund for employees of the state budget sector. An additional PLN 2.2 billion is also to be allocated to the day-to-day operations and investments of the Police, Border Guard and State Fire Service.

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Budget 2021 – reasons for the amendment

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Wyborcza.pl points out that the budget amendment is the result of several elements. – Such a decision was to be expected, the government assumed the worst pandemic scenario when constructing this year’s budget. Last year was very weak due to a series of lockdowns – starting with the most powerful spring one. The country’s GDP fell by 2.7 percent. This year is expected to be much better – says Łukasz Kozłowski, chief economist of the Federation of Polish Entrepreneurs, vice president of the Center for Legislative Analysis and Economic Policy (CALPE).

According to Prime Minister Morawiecki, economic growth will be higher than expected and will be around 5 percent.

In addition, as we read, people began to spend money making expenses that they could not or were afraid to bear in the last year. “Tax revenues from January to July, compared to the same period of last year, are higher by about PLN 40.2 billion” – gives Wybcza.pl, adding that “the better than assumed budget condition is also the result of accounting tricks.” What the President of the Supreme Audit Office, Marian Banaś, said earlier.

“Part of the expenditure described as realized in 2020 – in fact was not incurred during this period. These funds were transferred to the funds’ accounts, where they simply lay untouched last year – the Solidarity Fund, the COVID-19 Countermeasures Fund and the Government Development Fund Roads. They were included in the deficit burden for 2020 and will not burden the state budget deficit in 2021. Such operations exceeded PLN 41 billion “- writes the website. According to Wyborcza.pl, the head of the government, knowing that spending for the last, specific year, will be viewed more gently by everyone – he borrowed much, much more than he needed then to spend it now.

Łukasz Kozłowski points out, however, that “the condition of public finances should be assessed not only in terms of the state budget, but also in terms of all expenses”. – And let’s remember that the government to fight the pandemic created special purpose funds that were not included in the budget, an example of this are financial shields – says the economist in an interview with Wybcza.pl.

As the website explains, it is about expenses from various funds of Bank Gospodarstwa Krajowego or expenses for shields from the state-owned Polish Development Fund. “Both institutions (BGK and PFR) issue bonds with a guarantee of the state treasury. They are bought mainly by banks, and the National Bank of Poland buys them back from them. Thus, the government does not have to worry about the lack of financing” – we read.

The amendment “may signal that elections are fast approaching”

In the opinion of voters.pl, the government can achieve two goals by “diverting” expenses – it can show how well it is doing in the economy, and thanks to hidden expenses it meets the constitutional debt limits.

“Budget amendment? Now? If there are gaps in the budget, spending is most often shifted from the next year to the current year to make it easier to implement the budget plan … Spending surpluses now may signal that elections are approaching quickly …” – he wrote on Twitter Piotr Kuczyński, financial markets analyst.

Poland’s public debt

The Ministry of Finance announced this month that the debt of the general government sector (EDP debt) calculated according to the EU methodology amounted to over PLN 1 trillion 401 billion at the end of the second quarter of 2021. This means a quarterly increase of over PLN 12 billion. State Public Debt (PDP) – the national methodology for calculating the debt – at the end of June this year. amounted to PLN 1.152 trillion, which means a decrease by PLN 28.7 million (0.002%) quarter on quarter.

The significant discrepancies between EDP and PDP have recently been highlighted Supreme Audit Office in the report on the implementation of the state budget for 2020.

Wybcza.pl, TVN24 Biznes

Main photo source: PAP / Wojciech Olkuśnik



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