(Bloomberg) -- Poland’s government could help accelerate interest-rate cuts by bringing forward reductions in budget spending, according to the International Monetary Fund.
The IMF last week advised the central bank to keep monetary policy tight throughout next year, citing substantial inflation risks. It also recommended the administration identify necessary fiscal measures and start consolidating state finances in 2025.
“If the government introduced more tightening adjustments earlier, which is by the end of 2025, it would allow monetary policy to loosen faster,” said Geoff Gottlieb, the IMF senior representative in eastern Europe. This, in turn, would “also reduce interest rates on public debt and help reduce public debt faster.”
Prime Minister Donald Tusk’s government is in no rush to curtail spending before presidential elections next year, but with budget deficits running at above 5% of economic output, it risks pushing debt to a level inconsistent with EU rules.
Potential measures to support budget consolidation include raising some taxes and means-testing social benefits so that they support the most vulnerable members of society, according to the IMF.
“If there’s any over-performance in revenues, if any of the tax revenues is higher than budgeted, for example because of higher growth - save it, don’t spend more,” Jan Kees Martijn, the head of the IMF mission, told Bloomberg.
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