IMF Survey: IMF Provides Poland $20.6 Billion Credit Line

IMF News, May 6, 2009

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IMF’s Executive Board approves a one-year credit line for Poland of $20.6 billion to help it weather the global economic crisis.
Poland is the second country, after Mexico, to be granted access under the IMF’s new Flexible Credit Line (FCL).
The Polish government has announced it intends to treat the credit line as precautionary.
Rationale quoted from Poul Thomsen, IMF mission chief for Poland: the FCL will help preserve access to capital markets "by signaling the IMF’s strong endorsement of policies and by providing assurances that the national bank has adequate reserves to intervene if the situation gets worse than expected."

The IMF is deeply involved in lending to countries hit by the crisis, with IMF-supported programs helping Hungary, Latvia, Romania, and Ukraine.
Counting the new credit line to Poland, the IMF has to date extended loans to Europe worth more than $77 billion dollars.

Growth has averaged about 6 percent from 2006 to 2008.
Poland has been hit via:
- the export channel—most of Poland’s trading partners are in deep recession;
- the financial channel—a large share of the Polish banking system is foreign owned and global deleveraging is causing a significant slowdown in credit growth.
External position:
- Current account deficit kept relatively low compared with peers.
- External debt remained stable at about 40–50 percent of GDP.
Inflation and fiscal metrics:
- Inflation peaked at 4.8 percent before the onset of the crisis.
- The deficit was reduced to 2 percent of GDP in 2007—well below the Maastricht criterion of 3 percent of GDP.

Anti-inflationary focus:
- Long-standing and effective inflation-targeting regime and a freely floating exchange rate helped build confidence; inflation kept low and stable.
Fiscal anchor:
- Government’s commitment to adopt the euro provided a strong anchor for fiscal policy.
Financial sector measures:
- Banking supervision strengthened to be in full compliance with EU laws and directives.
- Government acted to slow foreign currency-denominated mortgage lending as it gained pace.
Structural reforms:
- Continued pursuit of structural reforms despite the difficult environment; notably, tightening of early retirement requirements to address very low labor participation.

Monetary policy has been loosened significantly in response to the economic slowdown.
Authorities have stressed determination to limit the increase in the deficit to support euro adoption aspirations and to limit government financing requirements.
IMF view on fiscal stance:
- Some increase in the deficit appears unavoidable and "Some increase is desirable as it helps offset the sudden slump in demand due to the external shocks," according to Poul Thomsen.

Source: IMF Survey: IMF Provides Poland $20.6 Billion Credit Line