Loan supports Government in mitigating impact of global economic crisis and
assists in Poland’s convergence with EU living standards
WASHINGTON, DC, June 17, 2010—The World Bank’s Board of Directors today approved the Programmatic Policy Loan (PL3) of 1 billion Euro (US$1.3 billion equivalent) for Poland. This is the third policy loan in a series of three lending operations for the country.
“The program of three lending operations totaling approximately €3 billion has been to support Government measures to mitigate the impact of the global crisis on households, workers, and business,” said Peter Harrold, World Bank Country Director for Central Europe and the Baltic Countries, “and to support Poland’s convergence with the European Union average living standards.”
Harrold emphasized that “We are glad that the program has already brought tangible results assisting the Government of Poland in such reforms as establishing education programs for five- and six-year olds, obtaining fiscal consolidation, and reducing pension fees. Poland has made impressive progress towards creating a modern, market-based economy, and we hope that with this last loan in the PL3 program we can further support fast economic growth and the Government’s reform plans.”
The policy loan series has supported a number of policy reforms crucial to maintaining Poland’s convergence to EU living standards. Key reform initiatives include the:
anti-crisis stability and development plan;
reduction in the tax wedge;
phasing out of early retirement pensions;
amendment of the law on freedom of business operations; and
new public finance act.
According to Jacek Dominik, Under-Secretary of State in the Ministry of Finance, “The first loan in the program (PL1) supported policy actions to strengthen public finance management, increase participation in the labor market, and improve the environment for doing business. The second loan (PL2) supported the governments’ ongoing reform plans, including in the social sectors to further improve the quality of service delivery. With the support of the third loan PL3 we hope to achieve more flexible regulations with respect to running a business by flexible redistribution of working hours for employees. As our top priority we also aim to introduce fiscal consolidation plan in order to strengthen financial sustainability in coming years. This loan is the result of our continued excellent partnership with the World Bank that benefits both sides through sharing of knowledge and experience. We hope that our mutual cooperation with the World Bank will continue.”
Like other countries in Europe, Poland faces the challenge of advancing economic reforms needed to stay competitive in a world of reduced capital flows and discriminating financial markets. It needs to bring about medium-term fiscal consolidation while safeguarding crucial social and infrastructure programs. Reforms supported specifically by PL3 include:
strengthening the service sector through streamlined rules and regulations;
bolstering social reforms such as hospital corporatization and universal primary education at 6-years of age; and
contributing to the robust social outcomes in the face of the economic slowdown through better targeted family benefits and greater flexibility in working hour adjustments.
“More than a year after the outbreak of the global financial crisis, Poland has managed successfully to shore up economic growth, strengthen financial markets and sustain social outcomes. However, as across the EU, the strength of the recovery remains uncertain.” said Thomas Laursen, World Bank Country Manager for Poland and the Baltic Countries.
”In order to regain strong growth and financial stability, the Government has to continue pursuing ambitious reform plans that include strengthening public finances, raising employment, and easing the business environment. We believe that our policy lending program of three loans has assisted Poland in advancing these objectives but the momentum needs to be sustained and where feasible accelerated. The World Bank stands ready to offer more of its lending and knowledge instruments to Poland which could either continue to focus on the same reform areas, or support new crucial targets such as, for example increasing energy efficiency and sustaining low carbon growth.” Laursen added.