June 7, 2023


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Poland pays the highest public debt ever

Poland pays the highest public debt ever

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This is mainly due to the high financial aid given to companies in recent months to save them from bankruptcy and to keep jobs. The epidemic caused a sharp acceleration of Poland’s indebtedness, which led, among other things, to: high inflation. According to the economist at the Warsaw School of Economics, Dr. Artur Bartoševic, we cannot afford more blanket shutdowns and should only be used on a point-by-point basis.

– If we want to deal with another wave of closure, the risks related to the deterioration of economic conditions and the risk of corporate bankruptcy will, of course, be great, and the public financial system will be greatly affected.

Today we have financed the exit from the crisis with debt, and we cannot sustain it indefinitely – says Dr. Artur Bartoševic, economist at the Warsaw School of Economics, and expert at the Jagiellonian Institute.

As the pandemic began to affect Europe and the United States in March 2020, the largest central banks opted for quantitative easing. The Polish National Bank also announced a program to purchase government bonds aimed at improving liquidity in the banking sector and increasing economic activity.

Additional funds were spent on crisis-resistance shields, which allowed jobs to be kept in conditions of corporate shutdowns or switching to remote work. However, the result of this step is the increased indebtedness of the state, partially hidden in special multi-purpose funds.

This debt is not visible in the state budget itself, but is published quarterly by the European Commission, and Poland, like other countries, has to report to the European Commission the actual debt situation, and not just the budget deficit or public debt.

At the end of the first half of 2021, the debts of the public finance sector (government and local government institutions) calculated using the EU methodology amounted to exactly 1,402,042 million PLN. That’s 57.4 percent. Polish GDP. This means that in a year and a half, Poland’s debt increased by 350 billion PLN.

The defense mechanism we set up has resulted in massive inflation. Economic phenomena are cruel, they reflect the case of wrong decisions and this must be taken into account – says the economist.

The influx of money into the market caused the highest inflation rate in more than 20 years, which in October reached 6.8%. Although the MPC raised rates twice, the reference rate is 1.25%, which is well below inflation. In addition, some economists accuse the central bank of poor communication with the market, which results in very high yields on long-term bonds compared to the past few months.

The decisions made by the MPC are the result of freezing the economy, or at least some industries, for several months. It was the shutdowns that caused the need for financial support from businesses and employees.

– Lockdown is the only experience that Poland has as a defense mechanism against epidemics – confirms Dr. Artur Bartoševic.

– At that time, when we were dealing with a phenomenon with a high prevalence, it was possible to test various other approaches related to civil protection, and not just take a complete freeze of the economy. It is very costly for the economy, and a huge risk to society due to the cost of this phenomenon and the fact that we subsequently have problems in financing public spending. This mechanism should be used as a last resort and not only as a priority and defense mechanism.

He stresses that before the start of the closure, extensive sanitary and epidemiological measures must be applied, as well as solutions tailored to the specifics of industries. It is also necessary to educate society, teaching Kowalski to function “normally” as a consumer, employee, and participant in social and economic life, but with an increased risk of disease.

– If the risk of disease is high, activity should be limited, but lockdown is a tool that should be used as a last resort – the Jagiellonian Institute expert assesses.

If there is a new threat, a new pandemic, with completely different risks, and a different scale of morbidity and mortality, then this tool should be viewed, but only as a point, which clearly limits the mobility of a particular part of society.

The division into zones (yellow and red) with restrictions depending on the number of infections was carried out by the government last fall, but, according to the expert, it turned out to be a fiction.

– We’ve used lockdown in individual districts and provinces, and people have migrated between the excluded space and the active space. Such illusory decisions should not be made, because it is the most expensive in the system – says Dr. Artur Bartoshevich.

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