Poland to introduce new fiscal rules to improve public finance stability
October 2, 2013
The Cabinet sitting
The Polish government adopted a draft amendment to the public finance act introducing a new spending rule aimed at keeping public finance under control without compromising economic growth, the government said following after a sitting on Tuesday.
"A stabilizing spending rule of anti-cyclical nature will be introduced, which will secure long-term stability of the public finance and will favor macroeconomic stability," the statement read.
The new spending rule is based on running average of GDP growth, applying already to 2014 budget. It will cover some 90% of the central and local government sector spending, the government said.
The rule will replace the existing one and hitherto sanctions on crossing the 50% debt-to-GDP threshold.
Under the current public finance act, after public debt exceeds 50% of GDP, Poland cannot increase the ratio of deficit to budget revenues in a following budget year.
In early June the Finance Ministry published a draft bill rewriting its automated austerity and fiscal discipline mechanisms, saying the current system is both insufficient to secure fiscal discipline and inherently pro-cyclical.
Based on the new spending rule, in times of relatively balanced public finance, spending will grow no faster than an average GDP growth in eight consecutive years: six past years and forecast growth for the current and the following year. However, the new bill will contain an adjustment mechanism that would tighten rules if public finance is not balanced.
Poland's public debt reached 57.3% of GDP at the end of the first quarter.