units by money transfers. In 2001 those transfers engaged 54% of expenditures and in 2006 amounted to
50% of expenditures.
The most important problems which have to be solved is that in the same time the quantitative and
qualitative adjustment has to be done.
In 2006 the public debt reached 47.6% of GDP. The debt to GDP ratio, after declining to 46.9% (i.e. by
0.7 percentage points) in 2007, is expected to increase slightly in the years 2008-2010, under the
assumptions adopted in Convergence Programme it will reach 47.3% of GDP in 2008 and 47.6% of GDP
in 2010, which means that the first threshold of 50% provided for in the Public Finance Act will not be
exceeded and the risk of exceeding the constitutional limit of 60% is minimal
At the same time, membership in the EU compels Poland to reduce the scale of fiscal imbalance, as we
are required to comply with the EU regulations, which stipulate discipline in public finance. On the other
hand, fiscal adjustment consisting in a reduction of deficit is tantamount to restricting the internal
demand generated by the state. To avoid a situation when such a reduction of public consumption affects
aggregate demand and, consequently, growth rate, the demand created by the state must be replaced with
other components of global demand, such as private consumption, investment or exports.
Favourable macroeconomic conditions, in particular stable public finance and high employment rate, are
necessary for the economic policy to face the challenges of the Polish economy, such as making it
modern and competitive, improving the condition for technical and social infrastructure, enhancing rural
development and regional and social cohesion.
The Convergence Programme should first of all support the improvement of the quality of the Polish
public finance. These are not only the general government balance and debt developments that should be
taken care of but also the efficiency of public finance. Therefore, apart from striving for low deficit and
debt, institutional enhancement is necessary to transform the public finance sector into a modern,
efficient and economical sector.
Maintenance of fast and sustainable economic growth and increase in employment leading to the
improvement of the level and quality of the citizens’ standards of living, remains the priority of the
Government’s economic policy. The policy is also oriented towards ensuring the achievement and then
maintenance of the long-term fiscal balance through the reduction of general government deficit and debt
to GDP ratios. It will be conducted in the environment of high economic growth and increasing
employment and on the other hand, of systematically growing level of resources for co-financing of the
EU projects, and costs of implemented necessary structural reforms, pension and labour cost reforms in
particular.
The need for fiscal consolidation in Poland is unquestionable. The debate should thus concentrate on
how, rather than whether to curb budget deficit. Very generally speaking, budget equilibrium can be
restored in two ways: by increasing revenues (higher taxes, larger tax base) or by decreasing public
spending.