Press Release No. 17/11

IMF Executive Board Approves New Two-Year €8.24 Billion Flexible Credit Line Arrangement for Poland

January 13, 2017

• Authorities intend to treat the arrangement as precautionary
• Poland continues to benefit from very strong economic fundamentals and policy frameworks
• Notwithstanding the strengths of the Polish economy, external risks remain elevated

The Executive Board of the International Monetary Fund (IMF) today approved a successor two-year arrangement for Poland under the Flexible Credit Line (FCL) with reduced access in an amount equivalent to SDR 6.5 billion (about €8.24 billion, or 159 percent of quota). The Polish authorities intend to treat the arrangement as precautionary and do not intend to draw on the FCL.

Poland’s first FCL arrangement was approved on May 6, 2009 (see Press Release No. 09/153). Successor arrangements were approved on July 2, 2010 (see Press Release No. 10/276); January 21, 2011 (see Press Release No. 11/15); January 18, 2013 (see Press Release No. 13/17); and January 14, 2015 (see Press Release No. 15/05).

Following the Executive Board discussion on Poland, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chairman of the Board, made the following statement:

“Poland continues to benefit from very strong economic fundamentals and policy frameworks. Economic growth remains robust, unemployment continues to decline, and deflation has dissipated. The current account is close to balance and international reserves have increased. Moreover, the banking system remains liquid and well capitalized. Poland’s institutions and policy frameworks rank favorably among peers.

“The authorities are committed to maintaining strong policies and institutions to support inclusive growth, which remains their key priority. In particular, the authorities intend to maintain sustainable public finances by keeping the fiscal deficit below the Excessive Deficit Procedure limit of 3 percent of GDP in 2017 and by starting fiscal consolidation in 2018. Furthermore, the authorities remain committed to safeguarding financial stability through effective oversight and implementation of the new macroprudential and bank resolution frameworks. In this regard, the authorities’ revised approach to foreign exchange mortgages aimed at addressing consumer protection concerns while preserving banking sector soundness and stability is a welcome step.

“Notwithstanding the strengths of the Polish economy, external risks remain elevated. A possible growth slowdown and banking sector stress in the euro area could have significant spillovers via trade, financial, and confidence channels. A faster-than-expected pace of monetary policy normalization in the United States and bouts of financial market volatility could affect Poland’s economy, given its sizable external financing needs. Furthermore, the upcoming Brexit negotiations and a heavy election calendar in Europe in the next twelve months add to uncertainties.

“Against this background, the new two-year precautionary Flexible Credit Line (FCL) arrangement would provide valuable insurance against external shocks, supplementing Poland’s flexible exchange rate and strong reserve buffers. At the same time, the authorities’ request for a significantly lower access sends a strong signal of their intention to proceed with a gradual and smooth exit from the FCL arrangement once external risks subside.”

The IMF established the FCL on March 24, 2009 and further enhanced it on August 30, 2010 (see Press Release No. 10/321). The FCL is available to countries with very strong fundamentals, policies, and track records of policy implementation and is particularly useful for crisis prevention purposes. FCL arrangements are approved for countries meeting pre-set qualification criteria (see Press Release No. 09/85). The FCL is a renewable credit line, which can be approved for either one or two years. Two-year arrangements involve a review of eligibility after the first year. If the country draws on the credit line, the repayment period is between three and five years. There is no cap on access to Fund resources under the FCL, and access is determined on a case-by-case basis. Qualified countries have the full amount available up-front, with no ongoing conditions. There is flexibility to either draw on the credit line at the time it is approved, or treat it as precautionary.

Poland is a member of the IMF since 1986 and has a quota of SDR 4,095.40 million (about €5,190.8 million).