2024-04-29 13:58 update: 2024-04-30, 19:08
Photo: PAP/Leszek Szymański
The cost of servicing Poland's debt in relation to GDP will increase in the coming years amid the higher-for-longer policy of major central banks, the finance minister has told the press.
"Poland is one of the countries with the highest debt servicing costs in the EU and this will be a challenge for us," Domanski said on Monday.
The yields on the country's Treasury bonds rose steeply after inflation spiked following the Covid-19 pandemic and Russia's invasion of Ukraine in 2022, spurring the central bank to hike interest rates to levels last seen two decades before. Since then, all new bond issues had to offer much higher yields than before while older, low-yield bonds are beginning to mature, raising the total cost of interest for the country.
"We spend more on debt servicing than on 800 plus (family-oriented government aid programme - PAP)," the finance minister said. "This is a problem that will get worse in the next few years - the cost of debt servicing in relation to GDP will increase, although fortunately slightly," he added.
Domanski said that the change in the policy of the US Federal Reserve (Fed), which has been postponing interest rate cuts, in contrast to what the market expected at the beginning of the year, had made the situation more difficult for Poland's budget. Other major central banks have also been reluctant to cut rates just yet.
"Because of the change in the policy of the Fed and major central banks, all emerging markets have come under pressure," Domanski said.
The cost of servicing government debt in Poland was 2.1 percent of GDP in 2023. (PAP)
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