The SAFE 0% program, proposed by the President of the NBP, Adam Glapiński, only serves to block the European SAFE program – Marek Belka told PAP. In his opinion, a better solution would be to reach an agreement with the ECB and use part of the foreign exchange reserves for armaments.
PAP: NBP President Adam Glapiński proposed to use unrealized profits from the valuation of gold, which is part of the central bank's reserves, to finance armaments. This would be done through market transactions, as a result of which the NBP's foreign exchange reserves would not change, but which would generate over PLN 190 billion of profit. These measures – under the so-called SAFE 0 percent program – they would be used for military purposes and, as a result, there would be no need to use the European SAFE program, which is a loan program. Do you think this is a good idea or not?
Marek Belka, former prime minister, former minister of finance, former president of the National Bank of Poland: First of all, these profits, since we started considering it, have probably almost half disappeared…
PAP: But PLN 90 billion is still PLN 90 billion.
MB: Well, it was supposed to be 190 billion.
PAP: Yes, but since half of the profits have disappeared, there is still PLN 90 billion to use. Moreover, President Glapiński's idea assumed that the entire operation would be carried out in a few years, probably also to minimize fluctuations in the gold price.
MB: But we don't know what will happen to the gold price in these few years. In addition, the SAFE 0 percent program. it was to be an alternative to European SAFE, and this project assumed almost immediate transfer of money.
PAP: Do you think the army would be able to use this amount immediately?
MB: The army would probably use it, but this is about the arms industry. Of course, these funds would have to be used gradually.
PAP: So we would take these funds and then keep them in the account? It's a bit like in the case of KPO, which – according to the Supreme Audit Office's report – was 90 percent used to supplement budget liquidity.
MB: If KPO funds were used in this way, firstly, they replaced taking out debt on the market, and secondly, they did not disappear. Over time, they have been or will be used for their original purpose.
PAP: Let's go back to SAFE 0%. Even assuming that the amount of unrealized profits from the valuation of gold is currently PLN 90 billion, it is still a large sum that can be spent on armaments.
MB: In the current legal situation, NBP profits are calculated at the end of the year and then 95%. of these profits are transferred to the government, and 5 percent. remains as a revaluation reserve. This means that the Act on the NBP would need to be amended to enable the recalculation of the value of reserves not at the end of the year, as the current regulations say, but now. This SAFE 0% plan, which is actually Nawrocki's plan, not Glapiński's, assumes that the NBP would realize profits today and not at the end of the year, which means that the government would get this money earlier.
Moreover, this plan assumes that the government would have to spend this money not on what would be the government's preference, but for a specific purpose, i.e. a new fund financing the armed forces. Meanwhile, such a fund already exists, the Armed Forces Support Fund, managed by BGK. We, economists, do not like such solutions very much, because it allows for what is called off-budget financing, but at the same time it allows, in accordance with the current legal status, for the NBP to lend money to such a fund.
PAP: But I will repeat the question – is it a good idea to use additional profits from the valuation of gold held by the NBP for armaments?
MB: No, this is not a good idea, because it only serves to block the European SAFE program, that is, simply to block the European Union's armament effort, including ours. Because this European SAFE assumes priority in purchases for European weapons.
PAP: However, recently Deputy Prime Minister Władysław Kosiniak-Kamysz and the PSL club submitted a draft bill that combines these two things, because it proposes both the use of funds from the European SAFE and the National Bank of Poland.
MB: Sure, as Minister of War, so to speak, I would also take money from wherever I could. So Deputy Prime Minister Kosiniak-Kamysz proposes that since President Nawrocki has a veto, the money can be taken in a different way. Therefore, if it is possible to take money from the central bank, this will mean that the NBP will have to grant a loan to the BGK fund, but the proposal is for it to be a different fund than the already existing one.
PAP: President Glapiński assured that the operation of selling and redeeming gold does not require any changes to the Act on the National Bank of Poland.
MB: It doesn't require it, but transferring these realized profits to the government or anyone – yes. Because currently you have to wait until the end of the year to receive the profit, whereas according to the National Bank of Poland's proposal, this money would be paid now. Moreover, the profit is calculated based on the price on December 31, so to calculate the profit based on today's valuation, a change in NBP accounting would be necessary.
PAP: Commercial banks have the option of paying advance dividends. Is this not possible in the case of NBP?
MB: There is no such possibility, or at least so far there has been no such possibility. Moreover, if there is a proposal to change the law in this area, it would probably need to be consulted with the European Central Bank, because we are in the euro zone. Although we have not adopted the euro, we are a member of the monetary union, and more specifically, we are a member of the European System of Central Banks.
I remember that when I was the president of the NBP and we were making currency interventions for small amounts, several hundred million euros each, to drive away small speculators who were attacking the zloty, every day – and we did it four times, usually at the end of the day – I called the then president of the ECB, Mario Draghi, and told him that we had such and such a situation and we wanted to intervene not to manipulate the zloty exchange rate, but to scare away the speculators, and he always told us to they did as we thought and thanked them for the information. That's all, he didn't say whether he was for or against it. However, if we did not inform him, and difficult times came and we had to ask the ECB to launch a currency swap, they could say that they will not do it because they do not have to.
PAP: But you are a supporter of using funds from the NBP's foreign exchange reserves, although perhaps not necessarily in the form of payment from profit, but rather as a kind of sovereign wealth fund, i.e. a state investment fund.
MB: This is a bit of a separate issue. First of all, I am a strong supporter of adopting the euro in Poland.
PAP: There probably aren't many of them left?
MB: There are more and more of them, but they don't always want to come out.
PAP: They're probably not tough.
MB: Well, I'm a retiree, I'm not afraid to stick out. In any case, there is no need to create any fund if, for example, you want to use part of the foreign exchange reserves, let's say about EUR 40 billion, for armament purposes. For this, first of all, you would need to talk informally – absolutely unofficially – with the ECB. There is a provision in European law – although I will not say exactly where it is now – that countries that are in the European System of Central Banks but have not adopted the euro may allocate their foreign exchange reserves also for purposes other than defending currency stability, provided they receive permission from the ECB. Permission, i.e. no objection.
PAP: So, in your opinion, a better solution than gold operations is to reach an agreement with the ECB and simply use part of the foreign exchange reserves for arms purchases.
MB: Of course. Moreover, I believe that we should take advantage of the European SAFE program, because I agree with the statement – probably made by one of the PiS MPs – that it is better to be in debt than to be occupied.
Marek Siudaj (PAP)
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