Poland is ready to widen its budget deficit by 16 billion zlotys ($4.87 billion) this year and suspend a ceiling on public debt, the government said on Tuesday, recognising that the slowing economy left it no choice but to loosen its fiscal discipline.
Poland, the European Union's sixth biggest economy, had won praise for its robust growth and for keeping a tight lid on spending and debt, but that became hard to sustain after the economy almost entered recession at the start of this year. Prime Minister Donald Tusk, announcing the changes in public finances, said the government had to widen the deficit because projections show that budget revenues this year will be 24 billion zlotys below the level previously forecast. "We have to decide how to cover this shortfall. We would be willing to increase the budget deficit by about 16 billion zlotys and cuts (in expenditure) in the ministries would amount to 8.5-8.6 bln zlotys," Tusk told a news conference.
Finance Minister Jacek Rostowski said increasing the deficit would release money into the economy worth the equivalent of 1 percent of gross domestic product (GDP), which he said would stimulate growth. He said a debt ceiling written into law, which essentially freezes the budget if public debt exceeds 50 percent of GDP, would be suspended this year and next.
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