In the plan for 2025-2028 adopted by the government, the Ministry of Finance assumed a reduction of the deficit below 3 percent of GDP in 2028 and a gradual reduction of debt, ultimately below 60 percent of GDP in 2030 – said Andrzej Domański, head of the Ministry of Finance.
– We decided to choose a 4-year path in the plan. It is important for us to improve the parameters related to the debt level as quickly as possible, to get it below 60 percent as quickly as possible. The 4-year path means faster debt reduction and greater credibility towards the markets, Domański said during a meeting with journalists.
– The higher the level of debt, the higher the costs of servicing it. The longer we stay above 60 percent, the proportionally higher the effort becomes. Our plan assumes that it will fall below 60 percent in 2030, he added.
Maintaining a specific debt level (below 60%). GDP) and the public finance sector deficit (3% of GDP) are elements of the so-called EU Maastricht criteria.
Government plan for 2025-28
The Minister of Finance emphasized that he hoped that European Commission will accept the medium-term budgetary and structural plan for 2025-2028 presented by Poland.
– We were in active technical dialogue with the European Commission, yesterday I talked to Commissioner (Paolo) Gentiloni in Luxembourg. These are not formal decisions, so I do not want to prejudge, but based on these findings, we believe that the path we presented to the EC will be accepted by it at the turn of the year, said Domański.
Deputy Director of the Department of Macroeconomic Policy at the Ministry of Finance, Joanna Bęza–Bojanowska, indicated that the plan assumes that at the peak – in 2027 – the debt in relation to GDP will reach 61.3%. GDP.
– Previously, in the Multiannual State Financial Plan (WPFP), we assumed a deficit of approximately 5.4 percent in 2024, and now we forecast 5.7 percent. The starting point is worse, which is related in particular to the development of budget revenues this year. This also affects the next year, said Bęza-Bojanowska.
– However, exceeding the 60 percent threshold is very insignificant – the debt at the peak in 2027 will amount to 61.3 percent, in line with the forecast included in the plan. This is not a drastic exceedance. However, preventing such an exceedance would require very drastic consolidation in 2025, she added.
“Government commitment” on deficit
As she emphasized, the medium-term budgetary and structural plan is a strategy that the government is committed to implementing and will be held accountable for.
– WPFP was a forecast, a document that showed how we forecast the macro-fiscal situation. However, the budget and structural plan is a government commitment, a strategy to be implemented by the government. It will end with recommendations of the ECOFIN council and we will be held accountable for this document. We were not held accountable for WPFP, it only showed a vision of development, said Bęza-Bojanowska.
The Ministry of Finance's presentation shows that Poland's medium-term budgetary and structural plan assumes reducing the deficit below 3%. GDP in 2028
The Ministry of Finance also assumes a reduction of the primary structural deficit in 2025 by 0.25%. GDP, which means greater fiscal effort in the coming years – indicated in the presentation.
Head of the Ministry of Finance: we wanted to avoid painful financial consolidation
During the meeting, Domański pointed out that the Ministry of Finance wanted the solutions adopted in the plan not to limit the dynamics of economic growth, he pointed to the so-called growth-friendly consolidation.
– The aim of the regulations was to avoid consolidation that would be painful for growth. Poland currently has the highest economic growth dynamics in the EU, and in 2025 we expect to be one of the fastest growing economies in the EU. We do not want to allow the (EU) (excessive deficit) procedure to limit this growth, said the Minister of Finance.
– We want the deficit recovery mechanism to be dominant, although we are taking measures (to raise revenues), such as excise duty or minimum tax – he added.
Bęza-Bojanowska informed during the meeting that “the structural and budgetary plan will not be updated as in the case of the convergence program, but every year in spring, by the end of April, we will present detailed actions to implement this plan in a given financial year.” – Therefore, these spring documents change their nature and will present very detailed activities. The first such document will appear in 2025 and will account for actions taken in 2024, she said.
– The document in April 2025 – due to the fact that it will be published shortly after the adoption of the plan – will not be of such an important nature, while the documents from 2026 will settle the activities for the previous year and present consolidation activities for a given year – she added.
Domański noted that the budget and structural plan consists of two parts – the budget part, for which he is responsible Ministry of Financeand the structural part, which is the responsibility of the Ministry of Development and Technology.
– Unlike the budget act, this plan is not a one-year plan, it is multi-annual. Its implementation will take place until 2028, said Domański.
Domański on “exit clauses”
The Minister of Finance pointed out that in the event of a significant, negative shock, the EU framework allows for the suspension of the excessive deficit procedure.
– The new fiscal framework includes so-called exit clauses, i.e. the possibility of suspending the excessive deficit procedure, for example as a result of external shocks. If a “black swan” occurs, the procedure will be suspended, Domański said.
– The old rules included only the so-called general exit clause, which was applied during COVID-19 to all EU countries. The new ones include two types of clauses – for the entire EU, i.e. if something happens throughout the EU, and a “country specific escape” clause – then the country applies for such a clause or the EC itself initiates it – added Bęza-Bojanowska.
Main photo source: PAP/Tomasz Gzell