The International Monetary Fund on Friday approved a new two-year Flexible Credit Line (FCL) worth some USD 33.8 billion for Poland, praising the country’s sound policy frameworks and prudent economic management.

The new FCL replaces Poland’s USD 30 billion precautionary facility that expires this month and has never been used.

“Poland has shown that very strong fundamentals and sound policies help strengthen a country’s resilience to crises. I think this is a key lesson that other countries can draw from Poland's experience,” Julie Kozack, IMF mission chief for Poland said after the IMF’s Board decision, as quoted on IMF website. However, explaining the rationale for renewing the credit line, Kozack said that IMF believes that 2013 will be a difficult year both for Poland and some of its major trading partners.

“Poland also faces some withdrawal of external funding from its banking sector. And volatile capital flows may also pose risks. For these reasons we think that the country will continue to benefit from an FCL in the requested amount.”, Kozack said.

“The new two-year credit line will support Poland’s overall macroeconomic strategy by providing a cushion against risks and by bolstering market confidence,” Kozack said.

Kozack emphasized though that Poland is experiencing only a growth slowdown due to both external and domestic factors are driving the slowdown of the economy - the demand for Poland’s exports has weakened, as most of the country’s main trading partners are in the euro area.“Developments in the euro area are also taking a toll on domestic demand—Polish households and businesses have started to consume and invest less because they are concerned about continued uncertainty in Europe”, she said. “We do not anticipate a recession this year.”, she added.

Kozack believes that Poland’s 2013 budget is appropriately balanced between continuing belt-tightening and supporting the slowing economy. She also said that Poland’s central bank should continue to cut policy interest rates to support the economy.

Poland’s Finance Ministry said that he funds will be used only in case of a deterioration of the international financial markets. At the moment, the interest rate on Polish sovereign debt is close to a record low.

The FCL was created in 2009 for countries with very strong policy frameworks and track records in economic performance. Qualified countries have the flexibility to draw at any time within a pre-specified window on the credit line, or to treat it as a precautionary instrument.