IMF Executive Board Approves New Two-Year €8.24 Billion Flexible Credit Line Arrangement for Poland

IMF News, January 13, 2017

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The Executive Board approved a successor two-year arrangement for Poland under the Flexible Credit Line (FCL).
Access was reduced to an amount equivalent to SDR 6.5 billion (about €8.24 billion, or 159 percent of quota).
The Polish authorities intend to treat the arrangement as precautionary and do not intend to draw on the FCL.
The FCL is renewable for one or two years; two-year arrangements involve a review of eligibility after the first year.
If the country draws on the credit line, the repayment period is between three and five years.
There is no cap on access to Fund resources under the FCL; access is determined on a case-by-case basis.
Qualified countries have the full amount available up-front, with no ongoing conditions.
There is flexibility to either draw on the credit line at approval or treat it as precautionary.

Poland continues to benefit from very strong economic fundamentals and policy frameworks.
Economic growth remains robust.
Unemployment continues to decline.
Deflation has dissipated.
The current account is close to balance.
International reserves have increased.
The banking system remains liquid and well capitalized.
Poland’s institutions and policy frameworks rank favorably among peers.

The authorities are committed to maintaining strong policies and institutions to support inclusive growth, which remains their key priority.
Fiscal policy:
- Authorities intend to maintain sustainable public finances by keeping the fiscal deficit below the Excessive Deficit Procedure limit of 3 percent of GDP in 2017.
- Authorities plan to start fiscal consolidation in 2018.
Financial stability:
- Authorities remain committed to safeguarding financial stability through effective oversight and implementation of the new macroprudential and bank resolution frameworks.
- Authorities revised approach to foreign exchange mortgages aimed at addressing consumer protection concerns while preserving banking sector soundness and stability is welcomed.

Notwithstanding domestic strengths, external risks remain elevated.
Identified external risk channels and factors:
- A possible growth slowdown and banking sector stress in the euro area could have significant spillovers via trade, financial, and confidence channels.
- 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.
- The upcoming Brexit negotiations and a heavy election calendar in Europe in the next twelve months add to uncertainties.
The new two-year precautionary FCL arrangement would provide valuable insurance against external shocks, supplementing Poland’s flexible exchange rate and strong reserve buffers.
The authorities’ request for a significantly lower access is intended to signal their intention to proceed with a gradual and smooth exit from the FCL arrangement once external risks subside.

The IMF established the FCL on March 24, 2009 and further enhanced it on August 30, 2010.
The FCL is available to countries with very strong fundamentals, policies, and track records of policy implementation and is particularly useful for crisis prevention purposes.
FCL arrangements are approved for countries meeting pre-set qualification criteria.
Poland’s FCL history:
- First FCL arrangement approved on May 6, 2009.
- Successor arrangements approved on July 2, 2010; January 21, 2011; January 18, 2013; and January 14, 2015.

Approved access: SDR 6.5 billion (about €8.24 billion, or 159 percent of quota).
Poland is a member of the IMF since 1986.
Poland’s quota: SDR 4,095.40 million (about €5,190.8 million).

IMF Communications Department, Press Release No. 17/11, January 13, 2017.