Washington, June 19, 2012—The World Bank’s Board of Directors today approved the First Public Finance Development Policy Loan of 750 million Euro (US$ 991,4 million equivalent) for Poland. This is the first in a series of two development policy loans (DPLs) supporting Poland’s goal of strengthening public finances.
“This program of support to Poland is central to the World Bank’s engagement in the country in the area of public finance reform,” said Peter Harrold, World Bank Country Director for Central Europe and the Baltic Countries. “It recognizes the strong reforms undertaken by the Government in this area, not least addressing the difficult area of sustainable pensions.”
The DPL is supporting the following development objectives:
- consolidating public finances to ensure a steady decline of the fiscal deficit to stabilize and over the medium-term reduce public debt to maintain favorable access to financial markets;
- strengthening fiscal institutions through the introduction of fiscal rules to ingrain a prudent fiscal stance over the medium term;
- advancing long-term fiscal reforms to secure the sustainability of social spending in view of Poland’s demographic challenge.
The Government’s plan of public finance reforms is aimed at stabilizing and subsequently reducing public debt levels to secure access to financial markets at reasonable costs, and thus ensuring the resilience of the economy to shocks. These reforms are also geared to securing the fiscal sustainability of social programs, including in the context of an aging population. Lastly, these reforms will help create the needed fiscal space to maintain and increase investments in infrastructure and human capital to support sustained growth.
"I am very pleased that such significant public finance reforms undertaken by the Government are being supported and appreciated by the World Bank," said Jacek Dominik, the Undersecretary of State in the Ministry of Finance of the Republic of Poland.
Poland’s economy performed well during the 2008 global financial crisis, reflecting strong economic fundamentals: it was the only economy in the European Union which avoided contraction in 2009 and grew by 3.5 percent annually in 2008-2010. Decisive counter-cyclical measures cushioned the global slowdown, but resulted in weakening of the fiscal stance: the fiscal deficit widened from 2 percent in 2007 (pre-crisis) to almost 8 percent in 2010, pushing up public debt by around 10 percentage points of GDP to over 53 percent of GDP. Poland’s economy rebounded in 2011, but growth is expected to slow down in 2012. To further sustain the economic recovery and to safeguard access to capital markets the Government has made strengthening public finances a central policy objective.
“We are very pleased to be able to support the Government of Poland’s ambitious reform plans,” said Xavier Devictor, World Bank Country Manager for Poland and the Baltic Countries. “In a difficult environment, Poland’s economy continues to perform well and this new loan will support a set of reforms to further strengthen the country’s position.”