Poland’s Ministry of Finance admits that presidential vetoes could strip billions of zloty from the 2027 budget and bend the public debt path upwards, yet it refuses to prepare a fallback. The draft rests on 16.9 billion zloty of revenue from eight bills and amendment packages that may never become law, and the ministry will not say how the gap would be filled.
Answering questions from WNP.PL, the ministry called possible vetoes of revenue-raising government bills an important risk factor for its macroeconomic scenario. Should those projects fail to enter into force, revenue of the general government sector could fall and the public debt trajectory would worsen.
The ministry listed the knock-on effects: trouble meeting the prudential procedures set out in the public finance act, stronger fiscal adjustment in later years, and slower growth.
– Failure of the pending projects to enter into force could lower revenue of the general government sector, worsening the public debt path. As a consequence, it could make it harder to comply with the prudential procedures arising from the public finance act, which would force stronger fiscal adjustments in the coming years, holding back the pace of economic growth – the ministry said in its statement.
No contingency figures appear in the draft, because the ministry says it cannot judge which bills the democratically elected parliament will pass and which will or will not be signed by the president. The budget act leaves no room for alternatives – the rules do not allow amounts in the state budget to be entered in variant form.
The sums at stake are itemised. Changes to the Energy Law are to deliver 3.6 billion zloty, support for energy-intensive companies 2.8 billion zloty, revisions to PIT, CIT and the lump-sum tax 2.6 billion zloty, and tax changes targeting consumer behaviour 2.7 billion zloty.
What stays unanswered is the repair mechanism. The ministry has not indicated whether a shortfall would mean higher borrowing needs and fresh debt, spending cuts, or a search for other revenue sources.
Moody’s cut and the price of borrowing
Financing costs are a second flashpoint. On 18 September, the day Moody’s decided to downgrade Poland, the yield on ten-year Polish bonds rose from 6.158 per cent to 6.310 per cent. It dropped the following Monday, which, in the ministry’s reading, suggests part of the risk had already been priced in.
Paweł Wojciechowski, chief economist of the employers’ organisation BCC, put numbers on that sensitivity. With gross borrowing needs of about 565 billion zloty, a 10 basis point rise in financing costs means roughly 0.6 billion zloty of extra annual expense, 25 basis points about 1.4 billion zloty, and 50 basis points some 2.8 billion zloty.
Piotr Arak, chief economist at VeloBank, cautioned that the effect accumulates gradually. A lasting 15 basis point increase in yields during 2027 would concern mainly new issues and add around 1-2 billion zloty.
The ministry’s own answer is terse: the ceiling for servicing Treasury debt in the 2027 draft is not at risk at present and needs no correction. Many domestic and international factors shape the cost of debt, it added.
Rating agencies move with a lag
Kamil Sobolewski, chief economist of Pracodawcy RP, backed that reading, saying the Moody’s decision surprised nobody.
– Rating agencies usually act with a delay relative to economic fundamentals and the market’s reaction to them. That was the case this time as well. The Moody’s downgrade brings its assessment of Poland in line with those of Fitch and S&P. A stable outlook is good news against rather unambitious market expectations – Sobolewski told WNP.
His priority for Poland is reversing the debt trend.
– Poland needs to lower the trajectory of debt relative to GDP. Neither the light-hearted crowd claiming debt is not a problem nor the hardliners treating the current deficit as an existential threat are right – he stressed.
Sobolewski called for sensible collection of public levies, smart spending and a halt to expenditure growth, warning that aggressive cuts or tax rises at the cost of growth could do more harm than good.
A standoff that limits consolidation
The Presidential Chancellery told WNP that the effects of vetoes cannot be assessed apart from the quality of the legislation. In its view the vetoed bills were badly prepared and in many cases raised serious doubts about compliance with the constitution and existing laws, with responsibility for drafting and passing them resting on the government and the parliamentary majority.
– Responsibility for the state of public finances and for conducting fiscal policy lies with the Council of Ministers, in particular the Minister of Finance, and with the Prime Minister – the Chancellery said.
The market wants a credible path for reducing the deficit and debt. That is where the problem sits: Moody’s cited the political impasse between the government and the president, along with approaching elections, as factors limiting the scope for meaningful fiscal consolidation. The ministry presents no plan for absorbing a revenue shortfall and waits to see which bills clear parliament and which the president signs.
Moody’s lowered Poland’s rating from A2 to A3 – the first such move in the country’s history.
Źródło: WNP.PL, Fot. Katarzyna Bartman / PTWP
