Debt of the public finance sector, including all state funds and institutions, the so-called general government debt was at the end of December last year PLN 2.4 trillion – according to recent information from the Ministry of Finance. Within a year, it increased by as much as PLN 323 billion to 60%. GDP.
This is the maximum level of debt under EU criteria, which the European Commission allowed Poland to temporarily exceed due to the need for increased military spending. Now the only question is whether there will be anyone willing to further increase this debt and at an even faster pace than the record-breaking one from last year?
Capital fled to the dollar
In the recent times of war unrest in the Middle East, resulting in high fuel prices and the threat of escalating inflation around the world, large capital has fled to the dollar. The Polish government is currently looking for lenders there.
Citi, Goldman Sachs, JP Morgan and Société Générale banks received a mandate for organizing the issue of 5-, 10- and 30-year benchmark bonds denominated in US dollars – the Ministry of Finance said in a statement. The timing of the transaction will depend on market conditions, it was also stated.
Rising interest on Polish debt
Looking at the results of the last tender at the end of March, it is clear that investors expect higher interest rates. The yield (interest) for 5-year bonds was 5.4%. while at the auction in February it was 5-5.2%, for 10-year bonds – 5.7%. while at the tender in February it was below 5%. by approximately 1 percentage point you also had to pay more for short-term bonds.
The borrowing needs of the state budget in 2026 amount to as much as PLN 690 billion, and in the next year, according to the debt management strategy, they may reach up to PLN 700 billion. In the current situation, the government must also look outside Poland or limit spending for these loans, which are huge for the Polish economy. However, he accepted the loan option.
Foreign issues of Polish debt
In January, the euro debt was successfully issued for EUR 3.25 billion and achieved a profitability of 2.964%. for five-year bonds and 3,739 for 10-year bonds.
In February, Poland also sold bonds in Japan for 212 billion yen with a yield of 2.9%. for 10-year securities and 3.65 percent for 20 years, and those with the lowest maturity, i.e. three years, with up to 1.88 percent.
The American market is unlikely to offer such good conditions. This is because 10-year US government bonds are currently quoted with a yield of 4.35 percent, so it is difficult to expect that Polish debt will have lower interest rates than American debt. However, this gives the Ministry of Finance an option to choose if the situation on the markets of individual currencies, i.e. euro, yen and dollar, changes.
Author: Jacek Frączyk, editor of Business Insider Polska
