Poland cuts public debt by 9pct of GDP by stripping pension funds of PLN 153.15bn
February 4, 2014
Labor Minister Wladyslaw Kosiniak-Kamysz, Finance Minister Mateusz Szczurek and chief of ZUS state social security fund Zbigniew Derdziuk
The Polish government appropriated PLN 153.15 billion in assets from privately managed pension funds OFE, including PLN 134 billion in Treasury bonds for cancellation in a move that will reduce public debt by 9% of GDP by EU methodology, officials told a Monday briefing.
The transfer of 51.5% of OFE portfolios, mandated by an ongoing pension overhaul, reduced public debt by a nominal PLN 130 billion, Finance Minister Mateusz Szczurek told a press conference.
"We estimate that as a result of this operation the public debt decreased by PLN 130 billion ," he said. "According to the EU definition that debt reduction amounted to around 9 pps of GDP."
"We finally see that Poland is a low-debt country," Szczurek told reporters.
That move, while not opening the door for any new spending, Szczurek said, was necessary to avoid tax hikes. "I can't make any declarations but Poland will certainly remain a country with low taxes," he said.
The asset transfer, the opening stage of a large pension overhaul, also included PLN 17.2 bln in other Treasury-guaranteed papers and PLN 1.9 billion in cash.
Treasury papers will be cancelled and the sums credited to the accounts of pension savers at the state's own social security office ZUS.
The Polish government is also making participation in the partially privatized portion of the system optional and freeing the rump pension funds from a highly regulated investment regime.
The pension fund reform bill was signed into law by President Bronislaw Komorowski in late December but sent for review to the Constitutional Tribunal.
The government said it is resting easy ahead of that decision and needs no "Plan B" in case of an unfavorable ruling.
"We are confident about the constitutionality of the acts of law that were passed by the government, the parliament and signed by the president," Labor Minister Wladyslaw Kosiniak-Kamysz said.
"There is no emergency plan, there is no reason to come up with one."