FOR Communication 1/2023: The real deficit is even bigger - as much as 345% of what the government presents
According to the estimates of independent experts - former longtime employees of the Ministry of Finance, the real budget deficit may amount to over 235 billion PLN. That's 345% of what the government presents.
- Last autumn, the government sent an incomplete and false state budget to Sejm. At the same time, as experts in the field of public finance, we prepared and also sent to the Sejm on the day of the first parliament reading of the budget, a real, corrected state budget, which showed a much larger state’s budget deficit – says Sławomir Dudek PhD, public finance expert, president, and FOR chief economist, one of the co-authors of the real budget.
More budget fiction
During the legislative works on the budget, the scale of budgetary fiction increased. The government partially maintained the inflation shield, which was not projected in the budget, and in the place of the restored tax rates introduced other, more expensive solutions financed by debt. Moreover, the scale of expenses financed outside the control of parliament has increased, and creative accounting processes have intensified during these few weeks.
- As a result, the Senate received an even more incorrect and unrealistic budget. In October, we assumed that the budget deficit would amount to 206 billion zł. Now, current estimates show that it may amount to over 235 billion zł, and in the extreme scenario even 250-255 billion zł. The real deficit of the state budget is almost 345% more than presented by the government in the draft sent to the Senate - points out Sławomir Dudek PhD.
Every fourth zloty of debt is beyond the control of the parliament and society
- The government has never responded to our estimates, has not provided detailed explanations and comprehensive data allowing for the assessment of the true state of public finances. The government stands against the wall, it wants, through creative accounting and bypassing the budget process controlled by the parliament, to postpone the problems of public finances to the end of this year or the next year, after the elections - adds the expert.
The government hides expenses from the Sejm, the Senate and finally the taxpayers themselves. It takes out public finances outside of the budget, using various types of funds.
It also does not reveal many operations related to the implementation of state’s duties that have an impact on the increase in the budget deficit. Thanks to creative accounting, the PiS government can manipulate the amount of deficit, and the parliament loses control over the state budget. As a result, the government misleads taxpayers who contribute to the state budget, which ceases to be useful for the assessment of Poland's financial situation.
The debt of these funds, which are not part of the state budget, will reach the gigantic amount of 422 billion zł at the end of next year - 9 times more than in 2015. This amount corresponds to 13% of GDP. And this means that every fourth zloty of debt is beyond the control of the parliament and society. These are 6,000 "Sasins", 2,000 annual budgets of the Końskie municipality, approx. 3,000 National Stadiums, approx. 5,000 pendolino trains.
Morawiecki's spending paradise
The budget does not include the financial plan of the Polish Development Fund (PFR), the COVID-19 Response Fund, the Government Local Investment Fund, the "Polish Deal" Fund, i.e. the Strategic Investments Programme. These funds are Prime Minister Mateusz Morawiecki's spending paradise. Just as “VAT mafias” transfer their transactions to tax havens, the government has transferred hundreds of billions of zlotys outside the state budget, beyond the control of the parliament.
Finances breaching the Constitution
- We have pseudo-National Council of The Judiciary, pseudo-Constitutional Tribunal, pseudo-Supreme Court, and we have patobudget. It should be remembered that the budget and public finances are also an "institution" with its own section in the Constitution. This institution has also been destroyed - alarms Sławomir Dudek PhD.
This is confirmed by Prof. Teresa Dębowska-Romanowska in her commentary to the Constitution of the Republic of Poland edited by prof. Safjan and Bosek (2016): “The omission in the Budget Act of financial plans of state organizational units performing public tasks of fundamental importance for the assessment of the state's performance of its constitutional and statutory functions, or giving these plans informative, non-binding meaning, directly leads to a violation of Art. 219 sec. 3 of the Constitution of the Republic of Poland”.
Also, the Supreme Audit Office repeatedly emphasized in its assessment of the implementation of the budget that the budget lost its position which allowed for the manufacture of a lower deficit. In 2021, NIK wrote that "It is reasonable to restore the state budget to the appropriate importance related to its distinct nature and central position in the public finance system." And in 2022: "The increased scale of transferring the financing of public tasks to funds located outside the state budget [...] allows for the creation of a lower state budget deficit."
A bitter diagnosis and a recipe for a return to normality
For several years now, parliament has been debating a fictitious budget, and the government has been held accountable based on fictitious state budget deficit.
- It's time to restore the rules in public finances. Restore the rank of Minister of Finance, transparency, and democratic control. The government has no source of money. Money is from our taxes. The right of citizens to understand and control how their money is spent is one of the pillars of a democratic state ruled by law - sums up Dr. Dudek.
Contact to author:
Sławomir Dudek PhD, President & Chief Economist
slawomir.dudek@for.org.pl
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