We have strong and efficient institutions that support the development of enterprises and finance local investments, housing and infrastructure projects. Such as in Germany, France or Italy – wrote the head of the Polish Development Fund, Paweł Borys, on social media.
As the president of PFR stated, they are now called “toys”, talks about the need for a “tsunami” and creates narratives about the allegedly unconstitutional “extraction” of financing outside the budget and “cuckoo eggs”.
Meanwhile, as Borys stated, the legal changes enabling the implementation of the PFR Financial Shield and incurring debt were supported by all political parties, knowing that the value of the program is PLN 100 billion. “It was a moment in 2020 when there was full political consensus that we, as the PFR Group, should act quickly and on a large scale to save the economy,” he said.
Out of budget
As he wrote, the first objection concerns the financing of anti-crisis activities outside the budget and added that “it is allegedly unconstitutional.” Paweł Borys wrote that Art. 216 of the Constitution of the Republic of Poland states that funds for public purposes are spent on the basis of an act. “There is no mention of the Budget Act or the Public Finance Act here. The legal basis for the Financial Shield is the ‘Act’, specifically the Act on the System of Development Institutions, which created a transparent and professional legal order for the operation of the PFR Group,” he added.
As he stated, “each issue took place under the control of the constitutional Minister of Finance, who had to accept its conditions – everything is therefore fully legal, and the Supreme Audit Office did not raise any objections to the issue of bonds by the PFR Group,” he added.
Debt and parliamentary control. “No one was hiding anything”
Paweł Borys wrote that the second objection is that the debt is incurred outside the control of parliament. He added that the facts are that the PFR Group implemented the Financial Shield in 2020-21 worth PLN 74 billion and bonds were issued for this purpose in accordance with the regulations created by the Parliament – as required by law. “The entire public knew the value of the program. No one hid anything,” he said.
As he wrote, these aid funds, based on programs approved by the Parliament, the government and the European Commission, were quickly distributed to 340,000 small and medium-sized companies at risk of the pandemic to protect 3.2 million jobs. “We also provided 280 public aid to large companies, saving such private brands as Wakacje.pl or EnterAir, as well as strategic brands such as LOT or PGG (Polska Grupa Górnicza – ed.)” – he added, emphasizing at the same time that the budget act includes a guarantee limit and guarantees that the State Treasury may provide for e.g. PFR.
Paweł Borys also wrote that the third objection states that bond issues by PFR and BGK are more expensive than if they were issued directly by the State Treasury. “The cost of financing the shield was 1.7 percent. It is so low that, taking into account current rates, inflation and the real cost, Polish taxpayers really made the ‘deal of a lifetime’,” he said.
So where does this PLN 12 billion over 10 years come from? – Borys asks, referring to previous economists’ calculations. “There is a so-called bank tax of 0.44 percent, from which these bonds were not exempt at the time of issue by PFR and BGK. As a result, the interest rate on PFR and BGK bonds was actually higher by about 0.50 percent compared to treasury bonds exempt from tax. Only that investors pay this tax back to the state budget, so it is neutral for public finances,” he said.
The issue of transparency of PFR activities
Referring to the issue of transparency of activities, Paweł Borys wrote that “PFR is probably the best audited institution in Poland.” “NIK comprehensively audited all major investments and programs, including PESA, PKL, housing investments, financial shield, organizations, etc. None of these audits brought any significant reservations resulting in negative conclusions. Are we perfect and do we not make mistakes? No, because it impossible. For 4 years, the PFR management board has been adopting 1,000 resolutions a year. That’s 4 important decisions a day. It’s not a walk in the park. But we act honestly, professionally and with due diligence – wrote the head of the Polish Development Fund.
“We need to consolidate public finances, which has been happening for a year now. However, everything indicates that this will be a decade full of turbulence and geopolitical dangers. If we are talking about the system of development institutions, let’s do it seriously and reliably. Let’s do a comparative analysis of what it looks like today, like years ago, like it looks like in other countries. First of all, let’s have a clear strategy for the future, let’s take care of these institutions and their team, because the environment is very unstable and something tells me that they will play a key role in the economy more than once,” he added .
Main photo source: Szymon Pulcyn/PAP