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Double counting of Poland’s debt by the PiS government

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– We are dealing with a constant degradation of the importance of what is called the state budget – said Marcin Zieliński, chief economist of FOR, commenting on the double counting of public debt by the Polish government. According to different methodologies, the government presents different calculations – one for national purposes and the other for EU reporting. The difference between them is already over PLN 321 billion.

The Law and Justice government calculates Poland’s debt in two ways. According to the national methodology and according to the EU methodology, for the purposes of reporting to EU authorities. According to “Rzeczpospolita”, the difference between these two types of statistics amounted to about PLN 322 billion at the end of March.

According to Polish state methodology the public debt amounts to PLN 1,209.9 billion. It includes liabilities incurred by individual units of the sector on the financial market. Meanwhile, the debt of the EDP (excessive deficit procedure), which is the basis for calculating the EU debt criterion and takes into account the central and local government sector, amounts to PLN 1,531.8 billion.

Budget debt. Differences between the Polish and the EU methodTVN24

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Importantly, the debt calculated according to the EU methodology also includes funds that are formally not included in the budget and are beyond the control of the parliament. These funds are solely controlled by the government.

The party brags, but nothing

– We are dealing with a constant degradation of the importance of what is called the state budget – said Marcin Zieliński, the chief economist of FOR, commenting on the situation reminding what the state budget actually is. – This is the central financial plan presented by the government and approved by the parliament, which the government later accounts for at the end of the year – said Marcin Zieliński, chief economist at FOR.

The economist reminded that the prime minister traveled around the country with the result of this budget and said that Poland had a smaller deficit, i.e. the difference between income and expenditure, than planned.

– It was planned that there would be 30 billion, and it turned out that 12 billion and the prime minister was driving with this result, he said that we have (deficit – editor’s note) smaller than planned, we have repaired public finances. In the same way, President Kaczyński said that public finances had finally been repaired. But meanwhile, it turns out that this is not due to the fact that there has been a relative balance of income and expenditure, but because a large part of expenditure is implemented outside the budget, despite the fact that these are expenditures for public tasks – the economist pointed out.

READ MORE: Morawiecki on the budget deficit: PLN 12 billion. “Not a real number”>>>

Zieliński pointed out that it is as if an entrepreneur submits a settlement to the tax office with a low income due to high costs, but in the bank, to obtain a loan, he shows low costs, so that there is a large income, to have greater creditworthiness.

Why the 320 billion difference?

– This is how it looks and let’s remember that there are PLN 320 billion for the first quarter, it is not known what will happen at the end of the year, because the debt management strategy attached to the budget act would imply that at the end of the year this amount could be PLN 100 billion more higher – indicated Zieliński, recalling the assumptions of the government.

Explaining what this means, the economist pointed out that we have a constitutional limit on the amount of debt in Poland.

– Public debt cannot exceed 60 percent GDPbut we also have something that is a precautionary threshold of 55 percent of GDP and if this threshold is exceeded, a budget without deficit must be adopted in the next year. When the pandemic broke out, it was not known what the situation would be, the government decided to transfer all this aid, all these shields, to entities outside the state budget, i.e. to Bank Gospodarstwa Krajowego and the Polish Development Fund, and this debt began to grow there. Although the pandemic is over, it turned out that these funds can also be used for other purposes, Zieliński pointed out.

Zieliński also referred to the words of Deputy Minister Marcin Horała, who said that the government is not hiding anything and all debt ratios are public.

– They are public in the sense that somewhere later they are reported to the European Union and there you can actually learn about these indicators. However, many of these elements along the way, we really have no idea about them, that’s one thing. But the second thing is that the government is accounted for by the parliament from the state budget, it is not accounted for the expenses that are outside the budget. Like for example Supreme Chamber of Control indicated last year by issuing a negative opinion (…) that last year we had a deficit of PLN 12 billion in the state budget, and at the same time, which is the EU equivalent, we had a deficit of PLN 100 billion, this is a huge difference – pointed out the chief economist of FOR.

READ ALSO: What you need to know about Polish debt – check Konkret24>>>

Main photo source: PAP/Piotr Polak

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