The COVID-19 Countermeasure Fund was created after the pandemic crisis hit the Polish economy in 2020. On the one hand, it was supposed to improve the spending of money on the economic effects of the coronavirus. On the other hand, to give the government the certainty that the pandemic debt will not lead to exceeding the debt limits, which are in the constitution and laws.
In theory, the Fund’s expenditure should be financed from the state budget, which is under parliamentary control. Each change in it must be assessed by the deputies, and any possible amendment must go through the entire legislative path.
Prime Minister Mateusz Morawiecki decides what the money from the COVID-19 Countermeasure Fund, the financing of which by bond issues is provided by Bank Gospodarstwa Krajowego, for.
Billions to Fight COVID-19
The sums that have been spent from the COVID-19 Countermeasure Fund so far are impressive. In the first year of its operation, when our economy was struggling with a recession, the beneficiaries received PLN 92.7 billion from it. Slightly less than the plan, which assumed transfers in the amount of approximately PLN 110 billion in 2020.
Although last year’s pandemic crisis was already fading away, and GDP probably grew by around 5%. year on year, the Fund continued to operate. In the period of January-November, its expenses amounted to PLN 52.7 billion. The full-year plan assumed that they would exceed PLN 61 billion. This would mean that from the moment the financial vehicle was launched to help fight COVID-19, over PLN 145 billion went to the economy, and it may turn out that this sum will be even almost PLN 10 billion higher. Such expenses from the Fund could have been made in December 2021 alone.
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Another year of out-of-budget release
Business Insider Polska has managed to establish that the COVID-19 Countermeasure Fund will also exist in 2022. his financial plan, which assumes this year’s expenditure at the level of over PLN 28 billion. During the year, however, the expenses from it will probably be higher.
– This plan may be changed – admits the Government Information Center in correspondence with us. The prime minister may decide to change the financial plan at any time.
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Who will be the biggest beneficiary of billions of zlotys from the Fund? Minister of Health Adam Niedzielski. This his ministry is to receive nearly half of all funds, i.e. over PLN 13.7 billion. Last year, the most money was transferred to the Ministry of Health – the plan assumed that it would be about PLN 30 billion (over PLN 26 billion had been paid by the end of November).
COVID-19 Prevention Fund expenditure plan in 2022.
- Minister of Health – PLN 13.7 billion
- Minister of Family, Labor and Social Policy – PLN 130 million
- Agricultural Social Insurance Fund – PLN 300 million
- Minister responsible for economy – PLN 1.4 billion
- Minister responsible for tourism – PLN 1.76 billion
- Minister responsible for communications – 253 thous. zloty
- Minister of State Assets – PLN 304.2 million
- Prime Minister – PLN 2.6 billion
- Head of the Chancellery of the Prime Minister – PLN 7.5 billion
- Minister of Agriculture and Rural Development – PLN 400 million
Although the head of the Chancellery of the Prime Minister, Michał Dworczyk, next to the minister of health, is to be the second largest beneficiary of the Fund, the amount planned for him is intended for a specific purpose. As much as PLN 6.5 billion is to be allocated to the implementation of the promises granted under the Polish Government Fund Order: Strategic Investments Program.
Everything indicates, however, that the expenses of the COVID-19 Counteracting Fund will be higher than the nearly PLN 30 billion planned at the beginning of January. In recent days, the Fund has been listed as a source of financing compensation for high gas prices. Their cost is approx. PLN 10 billion, and 60 percent. this amount will be covered by the vehicle located at BGK.
– There may be more such items during the year – admits our interlocutor from government circles.
Slight deficit at high expenses
Due to the fact that the government carries out such large expenses in the Fund located in BGK, Minister of Finance Tadeusz Kościński was able – for the vast majority of last year – to boast about the budget surplus. After November, it was just over PLN 50 billion. The preliminary estimates of the Ministry of Finance show that at the end of the year it turned into a deficit of approx. PLN 35 billion. The explanation for such a change is probably the fact that at the end of last year, some expenses were financed from the state budget a conto 2022 This year, the planned budget deficit limit is PLN 29.9 billion.
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However, the expenditure of the COVID-19 Counteracting Fund is not visible in budget statistics, and the cabinet of Mateusz Morawiecki shows them only in the deficit of the entire government sector. This is calculated in accordance with the EU methodology and is based on accounting practices used by politicians.
That is why some economists criticize such creative management of public finances. For many months they have been scored by the chief economist of FOR, Sławomir Dudek, who for years was the director of the Macroeconomic Policy Department at the Ministry of Finance. He indicates that the state budget does not show the state of the public coffers, and the use of the COVID-19 Counteracting Fund results in an alternative budget. It is not controlled by parliament, and the expenses incurred depend only on the decisions of the prime minister, who in theory does not even have to consult them with anyone.
Germany will follow the Polish road
Interestingly, pushing large expenditure items beyond the central budget is not only the Polish domain. Countries where there are strict budgetary rules (such as our constitutional public debt limit of 60% of GDP) are also looking for ways to circumvent them.
Such a plan has, among others the new ruling coalition in Germany, although it is co-created by the liberal FDP party, which attaches great importance to fiscal rules, and the coalition document announced the reduction of the state’s debt from 2023, at the same time, measures were announced that would enable financing the necessary development-friendly expenditure. Attempts to circumvent the rules are planned, e.g. by financing investment projects by entities whose debt is not subject to the rules. Among the ideas is to use the state-owned development bank KfW to finance private investments in energy and climate modernization. The German KfW, like our BGK, is a state development bank, the expenses of which are not included in the central budget.
Changing the rules in the EU?
– The new German ruling coalition wants to eat a cookie and have a cookie. The liberals who are part of it do not agree to raising taxes, and the social democrats and greens have ambitious goals related to, inter alia, with energy transformation or innovation, which are to cost around 176 billion euros within a decade. Additionally, the government is bound by the constitutional rule on debt, so politicians need to get creative – comments for Business Insider Polska Piotr Arak, director of the state think tank of the Polish Economic Institute.
In his opinion, in this situation, our western neighbors have no other option but to engage in investments, financing innovative projects and the green agenda of the development bank, i.e. KfW.
– This action is confusingly similar to what BGK is doing in Poland or as part of PFR pandemic aid. We also have a constitutional limit for public debt, there are also EU limits from the Maastricht treaty, and on the other side huge investment needs. What Germany plans to do in the coming years is part of a broader economic discussion on how to modify fiscal rules, expenditure rules to be able to finance climate policy and energy transformation – emphasizes Arak.
– As Poland, we are watching this debate. What will happen in Germany with KfW and extra-budgetary financing will later translate into what will be the European Commission’s policy regarding the exclusion of certain expenses in the statistics of the deficit and public debt – adds the expert.