MNI INTERVIEW: Poland Seeks More International Bond Buyers

MNI (LONDON) - Poland will be able to fund next year’s record-high gross borrowing needs without a major uptick in issuance, but will work to attract more foreign debt investors, Public Debt Department director Karol Czarnecki told MNI.

“We have built a very stable, well diversified structure and range of instruments, therefore from my point of view there is no need for dramatic change, we won’t be dependent only on one source of funding, and nor will we need to increase funding dramatically,” Czarnecki said in an interview.

“There is rather potential for growth via the three main pillars we have built: the domestic retail market, international wholesale markets, and the foreign markets funding of which some funding needs, e.g. the RRF, will also be financed by inflows from the European Commission,” he said, referring to the EU’s Recovery and Resilience Facility.

“Four years ago our financing process was based mainly on the domestic wholesale market. Post-Covid, having in mind what happened, we decided to diversify those sources of funding, which the change in the inflationary environment, coincidentally, made possible,” he said, pointing to healthy demand for retail products including inflation-linked bonds, as well as for shorter-term instruments linked to the central bank reference rate. (See MNI EM INTERVIEW: NBP Likely To Hold Rates In 2024 - Dabrowski)

“However there are some possibilities for non-residents to invest in the wholesale market. We are still working on increasing the participation of foreign, mainly institutional investors, and it is important that we do see growth there.”

FOREIGN FUNDS

While Czarnecki acknowledged that ratings agencies have questioned whether the performance of domestic debt would deteriorate in the event of a sudden outflow of foreign money, he said that such a risk was minimal given that foreign wholesale investors take just 13.5% of total issuance.

“We want to actively work on raising more funds from international investors, which would also increase liquidity and power the domestic market. And the policy we have conducted over the last three years is bringing about that outcome.”

Poland was among seven EU member states made subject to European Commission Excessive Deficit Procedures in June, after its fiscal deficit rose to 5.1% of GDP in 2023. The country is required to submit a medium-term plan for shrinking the shortfall, leading to binding spending targets over at least the next four years. (See MNI POLICY: EU Wants Poland To Adjust Deficit More Slowly)

“Of course we also have a threshold for the level of public debt, but we expect that to stabilise towards the end of 2025,” Czarnecki said. (See MNI EM INTERVIEW: Too Soon To Declare Inflation Victory - NBP's Tyrowicz)