The Debudgetisation of Public Finances in Poland After Covid‐19 and the War in Ukraine

Abstract

The experience of dealing with the socio-economic consequences of the Covid-19 pandemic and the war in Ukraine confirms the thesis that decisions on financial assistance must be taken without delay and that the government must have a certain degree of freedom and flexibility to act. However, do emergencies entitle governments to bypass the principles of responsible and transparent fiscal policy-making? Do the challenges countries face in dealing with the effects of the Covid-19 pandemic and the war in Ukraine also legitimise governments’ furthering of the debudgetisation of public finances? This article aims to answer these questions. The background of the considerations will be an analysis of Polish legal solutions and systemic practice. First, it is worth noting that anti-crisis measures in Poland have been taken primarily through extra-budgetary financial instruments, which are not included in the monitored scope of public finance. Surprising budgetary solutions appear, such as transferring Treasury securities instead of subsidies or pushing certain expenditures outside the state budget, to circumvent regulations and legally binding restrictions. In the context of parliamentary scrutiny, this means that a significant proportion of public debt is outside parliamentary control, and the scale of circumvention of the constitutional limit on public debt has been increasing for several years, reaching a considerable percentage of the GDP in 2021. This phenomenon is also accompanied by a record increase in public debt, fuelled by borrowing to finance tasks related to countering the Covid-19 pandemic and the socio-economic consequences of the war in Ukraine. It is, therefore, worth taking a closer look at the Polish government’s budgetary solutions, which undoubtedly do not contribute to fostering transparency in budgetary policy.

Comparative Fiscal Federalism and the Post‐Covid EU: Between Debt Rules and Borrowing Power

“…The author argues that while the war in Ukraine quickly prompted the EU to replicate some of the novelties it used to respond to the Covid-19 pandemic, structural fiscal and governance weaknesses still limit the ability of the EU to mobilize resources and leverage power on the international stage. In turn, Serowaniec (2023) focuses on the phenomenon of "debudgetization" of public finances in Poland after Covid-19 and the Russian invasion of Ukraine to show that using off-budget instruments in cases of emergency limits the transparency, legitimacy, and parliamentary oversight of state public finances.…”

Why does Poland need a fiscal council?

“…Spain, Portugal, Italy) and the new Member States (Cyprus, Romania or Hungary). However, given the fact that, according to estimates by the Institute for Responsible Finance, in 2022, the deficit not included in the state budget accounted for more than 80% of the real central sector deficit, the analysis of the Polish case should be of particular interest [17] .…”