Poland Seeks to Limit Zloty Impact on Public Debt Calculations
Poland plans to limit the impact of currency swings on the value of its debt to avoid breaching limits that would trigger compulsory austerity measures.
The government approved changes in public finance law that will allow it to use average annual exchange rates to calculate the portion of public debt in foreign currencies at the end of the year, according to an e-mailed statement today. It will also be able to subtract funds raised to finance next year’s borrowing needs from its debt stock to work out the ratio, the government said after a cabinet meeting.
Poland stepped into the market to stem the zloty weakening at the end of last year as that would have increased the value of its obligations in foreign currencies. Public debt topping 55 percent of economic output would force the government to raise some taxes.
“We’ve been thinking for quite some time on how to avoid the impact of the zloty on the level of public debt,” Prime Minister Donald Tusk said at a news conference following the government meeting. “I believe we’ve reached our goal.”
The ministry is using the so-called fixing rate from the last working day of the year to determine the public debt level in zloty. Thirty one percent of Poland’s obligations are in foreign currencies, data compiled by Bloomberg show. The debt stood at 53.5 percent of economic output at the end of last year, according to the Finance Ministry.
The planned changes will be debated in parliament. The government wants the amended rules to apply to this year’s debt calculations, Deputy Finance Minister Wojciech Kowalczyk said on Sept. 18.
The zloty appreciated as much as 0.2 percent to 4.0907 per euro, the strongest level since Oct. 18, and traded at 4.0965 as of 5:04 p.m. in Warsaw.
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