IMF Clears $8b Credit Line for Poland

The International Monetary Fund said late Saturday its executive board approved a new two-year flexible credit line arrangement for Poland worth about €8.24 billion ($8.77 billion), about half the size of the country’s previous credit line.

The IMF said the arrangement is expected to be treated by Polish authorities as precautionary, with no plans draw upon it, Reuters quoted IMF report as saying.

“Poland continues to benefit from very strong economic fundamentals and policy frameworks,” IMF Deputy Managing Director Mitsuhiro Furasawa said in a statement. “Economic growth remains robust, unemployment continues to decline, and deflation has dissipated.”

Despite the Polish economy’s strengths, Furusawa said that external risks remain elevated, including potential spillovers from slower eurozone growth, stress in the European banking sector and looming negotiations for Britain’s exit from the European Union.

“A faster-than-expected pace of monetary policy normalization in the United States and bouts of financial market volatility could affect Poland’s economy, given its sizable external financing needs,” Furusawa added.

The flexible credit line is intended as insurance against such external shocks, the IMF said, supplementing Poland’s flexible exchange rate and strong reserve buffers.

The IMF first established Poland’s flexible credit line in 2009 during the financial crisis. The latest arrangement is equal to about 159% of Poland’s quota, or share in the IMF.

Poland’s president on Friday signed into law the country’s disputed 2017 budget, which was at the center of an unprecedented parliamentary sit-in staged by opposition MPs who allege it was adopted illegally.

In mid-December, lawmakers from the governing right-wing Law and Justice party passed the budget in a room outside the main parliamentary chamber.

The move came after liberal Civic Platform opposition MPs staged an unprecedented occupation of the lower house of parliament over government plans to restrict media access to debates there.

Opposition lawmakers then demanded a re-run of the budget vote, insisting it’s adoption breached parliamentary regulations and was therefore “illegal”.

But the governing party dismissed the allegation and the PiS-controlled Senate passed the disputed 2017 budget on Wednesday.

The contested budget forecasts that Poland’s economy will expand by 3.6% this year while spending will comprise 2.9% of the GDP, just shy of the 3% of GDP limit required by the EU.