The parliament is working on the 2009 budget bill. The government is determined to keep next year’s budget deficit at the planned level.

Government: Keeping next year’s budget deficit at PLN18.2 billion as planned is important because:
It will create room for interest rate cuts by the Monetary Policy Council and this instrument is the healthiest method to combat a potential crisis. The government’s determination to keep the deficit at the planned level has already produced results: the Monetary Policy Council was able to reduce interest rates this week because it got the feeling that the relaxation of monetary policy (pursued by the NBP and the Monetary Policy Council) would not coincide with the relaxation of fiscal policy (government decisions on budget deficit;
Poland’s public finances will be kept on the track which makes it possible to reduce debt service costs. It is especially important now when creditors are keeping very close tabs on developing countries. Any decision resulting in a rise in budget deficit in such a country could lead to a sharp decrease in the valuation of its debt’s worth. In the extreme case, the increase in the deficit could be fully consumed by an increase in debt service costs, which would produce a result contrary to the one desired.
The GDP growth projection in the 2009 budget bill has been revised down from 4.8% to 3.7%. As a result, budget expenditure will be reduced by PLN1.7 billion mainly in reserve items, which will make it possible to flexibly shift funds between tasks if necessary. Changes will be made to excise tax on alcoholic beverages, resulting in a rise in the price of one bottle of beer by PLN0.07 and one bottle of vodka by PLN1.0, and on passenger cars with an engine capacity of over 2,000 cubic centimetres to 18.6%. This will generate PLN1,140 million for the national budget to be set aside as a Social Solidarity Reserve. (“Stability and Development Plan,” p. 5, November 30, 2008; www.kprm.gov.pl)

The goal of the “Stability and Development Plan” is to strengthen the Polish economy and stabilise the financial market.

Government: The government has presented the “Stability and Development Plan,” whose objective is to strengthen the Polish economy in the face of the global financial crisis. The document details the government’s measures to date and anti-crisis measures planned. Thanks to the government’s action, the economy may be supported with up to PLN91.3 billion. (...) All these measures will be taken without undermining the stability of public finances. Therefore, the government has decided to keep the 2009 budget deficit at PLN18.2 billion, which creates room for interest rate cuts by the Monetary Policy Council and enables reducing the debt cost. (...) Consumer demand will rise due to tax cuts. As a result of these changes, over PLN35 billion more will be left in taxpayers’ pockets in 2009 compared with 2007. The government also plans to increase investment demand by removing barriers to investment projects partially funded with EU money. (www.kprm.gov.pl)

Anti-crisis measures in the “Stability and Development Plan”

The first element of the [anti-crisis – ed.] plan is to increase the availability of loans for businesses. To this end, the government is going to increase the limit earmarked for Treasury guarantees under the 2009 budget bill to PLN40 billion. The Treasury will be able to guarantee the repayment of refinancing loans taken by banks from the National Bank of Poland in order to prevent the loss of liquidity. The Treasury will also be able to guarantee the repayment of individual liquidity loans on the interbank market.
The second element is to support financial institutions. The government is preparing another draft law to secure the solvency of financial institutions. Under the draft, the institutions could receive capital injections from the Treasury in exchange for their stock. In less than two weeks, the draft law will be submitted to ministries for consultation and will be consulted with banking officials.
The third element of the plan is to strengthen the system of guarantees for small and medium enterprises. The government estimates that the average value of guarantees from the EU Guarantee Fund, National Credit Guarantee Fund and National Guarantee Group will amount to 50% of the loan value. The government’s action is to enable to secure lending activity to the tune of PLN20 billion in 2009. To this end, the government is going to inject PLN2 billion to Bank Gospodarstwa Krajowego. The money injection will be coupled with legislative changes. The Council of Ministers wants to adopt a programme in the form of an ordinance defining the rules and direction for the development of guarantee activity, an amendment to the law on guarantees granted by the Treasury and some legal persons and an amendment to the law on province and county government.
The fourth element is to speed up investment partially funded from EU sources (structural funds and the Cohesion Fund) in 2009. After consultation with individual departments and province governments, the spending of EU money is to increase from PLN10 billion to PLN16.8 billion.
In order to increase propensity to invest, especially on the part of small Polish companies, the government will present a draft amendment to the law on corporate income tax. Small companies and start-ups will be allowed to deduct from taxable income any kind of investment expenditure up to EUR100,000 in 2009 and 2010. Companies which started operations in 2008 would also be eligible for this assistance.
The remaining elements of the government plan include measures aimed to remove barriers to investment in ICT infrastructure, the right to deduct additional spending on research from taxable income and support for investment in renewable energy sources. (www.kprm.gov.pl)