July 1, 2022

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Nick.  Public finances lose their transparency.  A tenth of GDP is off-budget debt, which is approximately PLN 262 billion

Nick. Public finances lose their transparency. A tenth of GDP is off-budget debt, which is approximately PLN 262 billion

The Supreme Audit Court published an analysis of last year’s budget execution and monetary policy assumptions. Among other things, NIK showed how the government confuses public finances, what accounting procedures it uses, how it degrades the state budget and how much budget deficit it really would be if the government did not use creative accounting. The difference between Poland and the European Union’s statistics on state debt at the end of the year amounted to PLN 261.9 billion.

In the report, the Chamber indicated that the government is implementing “measures that lead to a violation of the principle of annual budget and reduce the importance of the state’s general budget as it is the most important financial plan for the state.” These government activities limit the transparency of fiscal data presentation—including its assessment.

NIK provides some examples of budget underestimation.

First of all, more than 52 billion PLN, which was included in the state budget, was not spent last year, but is used for this. Secondly, it was possible to save only 25.7 billion PLN from the budget deficit because the government uses various tricks. Some funds lend money to others (such as the Labor Fund or the Demographic Reserve Fund of the Equity Fund (for the thirteenth and fourteenth pensions). Which has to be approved by Parliament because it is budgeted as an expense.) In the past year, various institutions have received bonds worth more than 22.3 billion PLN, this measure complies with the regulations, but increases the opacity of public finances.

The NIK stated that the provision of treasury bonds “thanks to these operations it is possible to create any amount of the state budget deficit.” Last year, the bonds were received for free (and were immediately redeemed), among others: Public Radio and Television – 1.9 billion PLN, PKP Polskie Linie Lotnicze – 2.3 billion PLN, the Polish Development Fund – 6.6 billion PLN, And the central port of communications – 2.23 billion PLN, or the Industrial Development Agency – 2.09 billion PLN.

The Chamber noted that in 2017-2021, public television and radio stations received treasury bonds worth more than 6 billion PLN. NIK verified that the free transfer of treasury bills amounting to PLN 22.3 billion for free last year led to an increase in the state treasury debt by PLN 16.3 billion, that is, it was responsible for 40.3 percent. An increase in the value of the debt ST.

If the government transfers subsidies instead of bonds, then the deficit should be higher by PLN 22.3 billion, that is, it will already reach PLN 48 billion. But this is not the only way to beat the budget. NIK notes that some financial operations increase state obligations and are not included in the budget. These are, for example, bonds issued last year by BGK and Polski Fundusz Rozwoju SA to enable anti-advocacy activities amounting to PLN 48.2 billion.

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All these activities mean that the difference between the public debt calculated according to the national and European methodology amounted to PLN 261.9 billion at the end of last year. This amount corresponds to 10 percent. GDP accounted for 22.8 percent. The state’s public debt. – Nik mentions. The most important amounts that are not included in the Polish statistics, but are shown in the EU statistics, are the debts of the Covid-19 Countermeasures Fund – PLN 138.8 billion and the Polish Development Fund due to the financing of financial shields in the amount of PLN 73.9 billion.

Alexandra Vandrigoska

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