MNI INTERVIEW: Polish Gold Profit Defence Plan Unnecessary

A proposal that Poland pay for large-scale defence upgrades using profits from a revaluation of the country gold holdings is unnecessary because the central bank is already obliged to hand over any gains to the government, a board member at the national development bank, Bank Gospodarstwa Krajowego (BGK), told MNI.

In March, President Karol Nawrocki and National Bank of Poland Governor Adam Glapinski, both of whom are aligned with the main opposition party, Law and Justice, proposed using the gold profits to pay for the military buildup. Nawrocki had earlier vetoed a government-backed law to access EUR44 billion in European Union SAFE loans for defence, on the grounds that the funding would make Poland more reliant on Brussels.

Mateusz Szczurek said in an interview that current regulations “already provide a clear and transparent framework for transferring the central bank’s profits to the state budget. Any additional arrangements limit fiscal flexibility and the coherence of public finances.” 

Prime Minister Donald Tusk’s response to the veto was to announce  ‘Plan B’, which would see Poland receive the EU loans, but limit what they can be used for, with non-military items such as civilian and border security, and infrastructure, ruled out. 

Both Plan B and the gold plan envisage some role for the BGK, but the institution has stayed neutral throughout what Szczurek called “surprisingly heated” discussions between the president and the government.  

Still, while national resilience is “about much more than just tanks and rockets and drones," separating defence- from non-defence-related investment is a challenge for most development banks, including the European Investment Bank, said Szczurek, who served as finance minister under Tusk in the middle of the past decade.

The BGK can finance both single-use technologies, dual-use growth companies and offer financing guarantees and loans to military hardware producers on its own books, Szczurek said.

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“Could the BGK take one side of the agreement negotiated with the Commission? Possibly, possibly not. We are able to tap Commission funds directly, and we already do this for InvestEU and some other development funds, which we employ abroad.”

Szczurek also downplayed suggestions of major differences between the broader development priorities of Poland’s two main political camps, arguing that there is “more continuity than anyone would be willing to admit.”

Having seen its economy boom since joining the EU, Poland now needs to generate significantly more corporate lending and investment if it is to maintain impressive levels of GDP growth, Szczurek said. (See MNI NBP WATCH: Poland CenBank Leaves Rates On Hold As Expected)

“Until something changes, we, as with any development institution, see ourselves plugging gaps, filling holes, and making sure that there is financing where nobody else is providing any. That includes long- term financing. Something that we are rolling out now is 30-, 40-, perhaps 50-year loans for local governments, to finance assets such as public transport, infrastructure and so forth, that will be around a long time.”

However, public finances are coming under increasing pressure, Szczurek said, with little sign that either of the two main camps contesting next year’s general election are willing to address the issue.

“Fiscal sustainability is a very hard sell at the moment. Prioritisation is not adding this and that to the budget, it should be moving money from one place to another. To be blunt, without a crisis hitting somewhere, it’s very difficult to see how, politically, that will change. Until then, fiscal sustainability will not be regarded as a true constraint.”