FOR Communication 1/2024: The new draft state budget - with larger deficit than in PiS assumptions
Syntesis:
- A week after it’s swearing-in, the Donald Tusk’s government presented Sejm with a draft state budget for 2024. It’s a budget with the highest deficit in the history of Poland, even larger than in the assumptions of the PiS government’s draft.
- Due to rejecting the so-called budget implementation act by President Andrzej Duda, the government proposed a new bill.
- The deficit is forecasted at 184 billion PLN, and most likely, due to the lack of transfer of NBP's profit, will be even higher, amounting to 190 billion PLN.
- Poland meets the criteria for being covered by the EU's excessive deficit procedure. The new government would then have to implement savings, for which it would be held accountable by the EU institutions.
- According to the European Commission's estimates, Poland in 2023 and 2024 will have one of the highest public finance sector deficits in the European Union.
The Donald Tusk’s government submitted a new draft state budget for 2024 to the Sejm on December 19, 2023. Following rejecting of the budget implementation act by the president, the government presented a new bill on special solutions for the implementation of the budgetary act for 2024. The project provides for an increase in the deficit to 184 billion PLN, which is nominally the highest state budget’s deficit in the history of Poland. The assumed deficit is also projected to be 20 billion PLN higher than in the draft proposed by the PiS government in September 2023. In the 2023’s state budget, the deficit amounted to 92 billion PLN. The new draft budget implementation act from December 28 also includes an increase in the amount of treasury bonds that can be transferred to various entities by the State Treasury - from 5 to 12 billion PLN, which will further increase the public debt and the deficit of the general government sector, calculated according to EU methodology.
Table 1. Basic budget data
Source: Own study based on the 2024 budget drafts – from September (PiS government) and December (KO-PSL-PL2050-NL government).
As part of meeting election promises, the government proposed new expensive programs, such as:
- Increase of salaries in the state budget sector - 13 billion PLN (5.2 billion PLN more than in the PiS draft).
- Increase of teachers’ salaries, including academic lecturers – about 30 billion PLN (19 billion PLN more than the PiS draft).
- "Babciowe" benefit – Active Parent.
- Funding of in vitro fertilization – 0.5 billion PLN.
- Extension of zero VAT on food – about 2.7 billion PLN only in the first quarter of 2024.
The servicing of the State Treasury's debt is expected to cost 66.5 billion PLN. The state will spend 63 billion PLN on the "800+" program, and 30 billion PLN on the "thirteenth" and "fourteenth" pensions. National defense (including the Armed Forces Support Fund) will consume 158 billion PLN, i.e., 4.2% of the GDP. Expenditures proposed by the PiS government, such as "care capital" (subsidies for childcare facilities) at 2.6 billion PLN, and „support benefit” for the disabled persons at 3.8 billion PLN, have been maintained.
The coalition during the election campaign promised to consolidate public finances and restore their transparency. The presented draft budget does not improve the situation in this area in any way. On page 7 of the draft's justification, it only mentions that "actions will be taken in the near future to increase the transparency of public finances."
The full content of the publication can be found in the file to download below.
Contact to author:
Bartłomiej Jabrzyk, FOR analyst
bartlomiej.jabrzyk@for.org.pl
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