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Poland has very strong economic fundamentals and policy frameworks. A credible inflation targeting regime has helped contain inflation, while the flexible exchange rate has played a key stabilizing role, and the sound financial supervisory framework has contributed to a well-capitalized, liquid, and profitable banking system. Broadly adequate international reserves and the precautionary FCL arrangement have helped maintain market confidence.
David M. Lipton
IMF Executive Board Approves New Two-Year US$33.8 Billion Flexible Credit Line Arrangement For Poland
January 18, 2013
The Executive Board of the International Monetary Fund (IMF) today approved a successor two-year arrangement for Poland under the Flexible Credit Line (FCL) in an amount equivalent to SDR 22 billion (about US$33.8 billion, or 1,303 percent of quota).
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), and January 21, 2011 (see Press Release No. 11/15). The Polish authorities have stated that they intend to treat the arrangement as precautionary and do not intend to draw on the FCL.
Following the Executive Board discussion of Poland, Mr. David Lipton, First Deputy Managing Director and Acting Chairman of the Board, made the following statement:
“Poland has very strong economic fundamentals and policy frameworks. A credible inflation targeting regime has helped contain inflation, while the flexible exchange rate has played a key stabilizing role, and the sound financial supervisory framework has contributed to a well-capitalized, liquid, and profitable banking system. Broadly adequate international reserves and the precautionary FCL arrangement have helped maintain market confidence.
“The authorities’ skillful macroeconomic management underpinned Poland’s solid recovery in 2010-11, allowing a gradual restoration of policy buffers despite the challenging external environment. These efforts included substantial fiscal consolidation, steady reserve accumulation, measures to mitigate risks related to foreign currency lending, and reforms to boost long-term growth potential.
“However, the economy is feeling the effects of headwinds from the rest of Europe, and growth has slowed since early 2012. Economic activity is projected to moderate further in 2013, with risks stemming from Poland’s substantial trade and financial linkages in the region. The authorities are committed to continue to implement sound economic and financial policies that support economic growth and improve the resilience of the banking system.
“Nevertheless, heightened risks to the balance of payments remain a key concern for Poland, and the challenging growth environment may also make the country more vulnerable to external shocks. Against this background, a successor two-year FCL arrangement, which the authorities intend to continue to treat as precautionary, will bolster Poland’s buffers against heightened external risks, help sustain market confidence, and continue to support the authorities’ overall macroeconomic strategy,” Mr. Lipton said.
The FCL was established on March 24, 2009 and further enhanced 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 could 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 1,688.40 million (about US$2,594.28 million).
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