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Polish FinMin plans major budget revamp in 2003

Working Papers



17th November 2002, Skopje, Macedonia
By Wojciech Moskwa

Finance Minister Grzegorz Kolodko said on Sunday he will propose a major overhaul of public finances early next year to prepare for Poland's membership of the European Union in 2004.
A package of bills, aimed at making Poland's rigid budget more flexible, should be completed in December or January, Kolodko told Reuters in an interview on the sidelines of an central European summit in Macedonia.
"The reform of public finances aims to make some budget expenditures less rigid. This (reform) will create controversies and serious discussions," Koldoko said.
"This does not mean that there will be no increases in (various social benefits). They will take place, but as a result of a political decision...not inertia of rules which may have made sense in past years."
In the 2003 budget 68 percent of total expenditure is made up of non-discretionary spending, including index-linked increases in state pensions or funding of the costly farmers' retirement scheme.
"Surely we want that ratio to be closer to 60 than 70 percent, especially since we will have to find more budget revenues in 2004 because of our EU entry," he said, referring to the need to co-finance EU development projects.
Kolodko said he hoped Poland's budget deficit would not increase in 2004 from the 3.9 percent of GDP plan for next year, because of additional EU-related costs, but did not rule out such a possibility.
Poland will be net beneficiary of EU funds, but not at the national budget level, because the central budget will help pay for EU-backed development projects, but the money will go direct to local projects.
Kolodko said some $4 billion will have to be set aside for EU costs in 2004, with part to be returned by Brussels later.