1. Arrangements with the IMF
     Extended Fund Facility and Standby Arrangements(1990-1996)    Flexible Credit Line (2009-2017)    Current Assessment  

2. References

Poland’s involvement with IMF lending facilities can be separated into two periods. Emergence from Communism and Standby Arrangements: 1990-96 followed by Flexible Credit Line Arrangements: 2009-2017. The first years mark Poland’s transition from a planned to a market economy, aided by the IMF. Current changes mark Poland’s solid growth and ability to hopefully withstand any global financial crisis or Eurozone crisis. In 2018 Poland purchased a large amount of gold reserves, their largest purchase since 1983.^[5]

Arrangements with the IMF

Extended Fund Facility and Standby Arrangements(1990-1996)

1989 marked the fall of communism in Poland, launching the country’s transition from a planned to a market economy.^[3] High debt severely hindered Poland’s transition, with annual loan and interest payments of US$10.3-billion, a sixth of the country’s GDP.^[4] Poland’s first IMF agreement was approved in February 1990 for a one-year term of SDR545-million.^[8] Although the country relied heavily upon the IMF’s financing, particular importance was given to the conditionality attached to the loan; a criterion for economic reforms.^[4]

However, upon implementation, the reforms faced resistance from the government, primarily concerning monetary policy and the rate of privatisation.^[9] The transition period resulted in a severe recession as real term wages saw a drastic fall in worth due to the revaluing of Poland’s currency: the zloty.^[10] Political opposition led to a deviation from the IMF’s reform programme, with the government easing monetary policy in the second half of 1990.^[11] Poland’s first agreement came to an end in March 1991, the member nation having drawn upon SDR357.5-million.^[8]

The Paris Club, an informal group of Western governments, announce a proposal to forgive half of Poland’s $33-billion debt, contingent upon the nation signing a new arrangement with the IMF.^[12] The loan reduction is offered in two stages; 30% forgiven upon approval of IMF arrangement and an additional 20% forgiven upon completion of the arrangement terms.^[12]

The IMF, hesitant to renew Poland’s loan arrangement, requires clear actions to be taken towards currency and price stabilisation for the possibility of renewal.^[9] Poland responded by devaluing the zloty and establishing a ‘crawling peg’ against the US dollar.^[11] Although IMF hopes for Poland to take a more active role in limiting inflation, the organisation offers the country a new arrangement from its Extended Fund Facility (EFF); employed for member nations, such as Poland, whose economic difficulties present a medium- to long-term balance of payment deficit, requiring a longer arrangement period enabling the provision of fundamental economic reforms.^[13] A two-year term loan of SDR1.224-billion is approved, a month after the expiration of Poland’s first arrangement.^[8]

Deviations in policy reform in 1990 begin to show its effects after the second agreement had been signed with the IMF in April 1991.^[9] The following two years (1991-2) saw an increase in the budget deficit from 3% to 7% as a share of GDP and high inflation (44%).^[11] The IMF suspends Poland from the EFF in June 1991, two months after approval was initially granted, with negotiations in 1991 and 1992 for the lifting of the suspension unsuccessful.^[9] Poland’s second agreement came to an end in March 1993, the member nation having drawn upon SDR76.5-million.^[3]

Witnessing the failure of completion, The Paris Club adjusted requirements for loan forgiveness, announcing the second stage (the additional 20%) of loan reduction would be awarded upon the success of an additional IMF programme in 1993.^[9] Poland enters a year-long Standby Arrangement (SBA) with the IMF of loan sum SDR476-million.^[8] The IMF limits disapproval towards Poland’s budget deficit and inflation rate, streamlining negotiations.^[9] Supported by the IMF, the Polish government proposes conservative fiscal policies (5% share of GDP in new taxes and expenditure cuts).^[9] The program is successful, ending in April 1994 with Poland having drawn upon SDR357-million.^[8]

The London Club; an informal group of international private lenders, agree to reduce Poland’s $13-billion debt by 45% contingent upon an IMF arrangement.^[14] Poland enters the fourth agreement, two-year SBA loan of SDR333.3-million in August 1994, four months following the end of its previous SBA.^[8] The reforms were identical to that of previous; reduction in the inflation rate, reduction in budget deficits and sustain economic growth.^[15] Poland’s fourth agreement came to an end in March 1996, the member nation having drawn upon SDR283-million.^[8] It is Poland’s last SBA with the IMF as of 2018, most likely due to the country’s GDP reaching pre-transition levels in real terms in 1996.^[16]

Flexible Credit Line (2009-2017)

Poland’s next arrangement with IMF occurred 15 years after the previous Standby Arrangement in 1994, in the form of a Flexible Credit Line (FCL) in 2009.^[8]

The Flexible Credit Line is a relatively recent IMF arrangement, one of two precautionary credit lines (the other being the Precautionary and Liquidity Line (PLL)) created in 2009 following the 2007 Financial Crisis.^[17] The aim of these two mechanisms is to provide the organization’s members with an alternative lending stream to a short-term balance of payment deficits caused by external shocks, such as the events of the global financial crisis.^[17] FCL is similar in structure to Standby Arrangements (SBA); must be requested by the member nation and approval is dependent on a pre-set qualification criterion.^[13] These arrangements do not exceed two-year lengths.^[13] The two principal distinctions in comparison to SBAs is the absence of access limits or conditionality, as FCL-qualifying nations are perceived to consistently implement responsible and appropriate macroeconomic policy.^[13]

Poland first entered into an FCL from the onset of the lending facility’s inception in 2009.^[8] The arrangement was approved May 2009; FCL of SDR13.69-billion ($20.58-billion at the time), 1000% of Poland’s quota at the time, one year in length with a 6-month review.^[18] Polish authorities stated the credit line to be a precautionary action, rather than emergency funding.^[18] The credit line increased the country’s reserves by a third during this period and provided security against macroeconomic issues deriving from a volatile currency which had seen a 40% fall between July 2008 and April 2009.^[19] This arrangement was renewed the following year for another one-year term of the same monetary sum (SDR13.69-billion).^[8] In 2011, Poland’s third (and consecutive) FCL arrangement was extended from one year to two and increased in sum from SDR13.69 to SDR19.17-billion ($30-billion at the time).^[8] These expansions in contrast to previous arrangements were a result of IMF reforms in August 2010; doubling arrangement lengths and removing access cap to monetary resources at 1000% of a country’s IMF quota- Poland’s new arrangement was 1400% of its quota.^[20] Poland’s fourth (and consecutive) FCL arrangement was again increased to SDR22-billion (US$33.8-billion) however fell relevant to its quota (1303% of quota).^[21] The increase was sought by the Poland government owing to falling economic growth, a reaction to the Eurozone’s financial instability.^[22] Poland’s fifth (and consecutive) FCL arrangement saw an access reduction, at the request of the Polish government, to SDR15.5-billion (US$23-billion), 918% of the country’s quota.^[23] Executive Director for Poland reasons reduced FCL is due to a strengthening policy framework improving economic buffers thereby reducing financing needs.^[24] However, potential external economic shocks failed to diminish in risk, encouraging continued membership of FCL.^[24] Poland’s sixth (and consecutive) FCL arrangement saw a further access reduction, at the request of the Polish government, to SDR6.5-billion (US$9.2-billion), 159% of the country’s quota.^[25] The Situation remains similar to the period of previous arrangement; the requested reduction, however, signalizes Poland’s intention to gradually exit its FCL arrangements’ continued renewal.^[25]

Despite 14 months remaining on Poland’s latest FCL agreement, Poland’s Deputy Prime Minister and Finance Minister Mateusz Morawiecki announced in October 2017 that the country will resign from its current arrangement (approved 2017) and the credit line overall.^[26] Morawiecki stated the decision was determined following extensive analysis of tax data, macroeconomic parameters, and evaluation of budget stability and currency reserves.^[27] The FCL arrangement expired the following month; November 2^nd, 2017.^[8] The FCL, approved in May 2009 with six renewals, was never drawn upon by the Polish government.^[8]

Current Assessment

Following several years of very strong growth, the economy is expected to slow to a more sustainable pace. Near-term growth is expected to slow to a still robust 3 to 3½ percent in 2019–20, with low unemployment. The banking system in the aggregate shows resilience to adverse shocks, although some medium-sized banks appear weak.^[28]

References

• Takkyu Ishino
• Takkyū Ishino
• Takkō Ishimori
• Takla
• Takla, Agsu
• Takla (disambiguation)
• Takla, Gobustan
• Takla Group
• Takla Haymanot (disambiguation)
• Taklai Gewog
• Takla, Jalilabad
• Taklak
• Taklakot
• Takla, Kurdamir
• Takla Lake
• Takla lake
• Takla Landing
• Taklamakan (short story)
• Takla, Masally
• Takla Mirzababa
• Taklang
• Takla Range
• Taklibhan
• Takli Dhokeshwar
• Takli dhokeshwar