25th Jun 2022

Poland asks for €15.5bn credit line from IMF

  • Dominique Strauss-Kahn (centre): G20 leaders recently pledged to increase the fund's standard financing capacity to $750bn (Photo: EUobserver)

Poland announced on Tuesday (14 April) that it will apply for a €15.5 billion ($20.5bn) credit line from the International Monetary Fund.

Warsaw is to make the request via a new lending facility created by the International Monetary Fund last month to enable primarily emerging countries with "strong economic fundamentals" to bolster their finances in a pre-emptive bid to prevent financial difficulties from arising.

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Speaking in Warsaw, Polish Prime Minister Donald Tusk said his government would apply to be given access to the funds from the IMF's Flexible Credit Line (FCL) over a one-year period, making it the second country to apply to the facility after Mexico indicated interest in a $47 billion credit line earlier this month.

"I am very pleased by this positive response from Poland to the invitation I extended to strongly performing economies to use this new instrument to bolster international confidence," IMF managing director Dominique Strauss-Kahn said in a statement.

"Poland has a sustained record of sound economic policies," he said. "Its economic fundamentals and policy framework are strong, and the Polish authorities have demonstrated a commitment to maintaining this solid record."

Mr Strauss-Kahn added he would seek quick approval for the credit line from the fund's executive board.

Analysts endorsed the move on Tuesday, saying it was partially designed to reassure jittery markets of the Polish government's capacity to maintain stable currency values and service current debt obligations.

Access to the credit line is also expected to help the Polish government reduce the cost of issuing bonds by allaying concerns of a potential debt default.

The zloty rose against the euro yesterday after the news was announced, finishing close to 4.24 to the euro compared to a mid-February low of 4.9 to the euro.

The FCL was established on 24 March along with a wider package of IMF reforms.

Unlike the more standard lending facilities at the fund, which provide loans to trouble-stricken countries on condition they implement certain economic reforms, the FCL is only available to states whose finances are considered to be in good order but who could benefit from further access to financing.

This no-strings-attached approach has helped greatly reduce the stigma historically associated with loan applications from the IMF, a development underscored by the market's positive reaction to the news on Tuesday.

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