Polish pension fund change to lead to one-off surplus in public finances in 2014

By bne IntelliNews October 24, 2013

Thanks to the government-proposed changes to the open pension fund (OFE) system, Poland will be able to report a one-time surplus in the general government sector - of 4.5% of GDP in 2014, according to the ministry of finance. However, the ministry admits that we will return to a deficit of 3.0% of GDP the following year.
It also reported that changes to the pension system will bring about saving to the public finances to the tune of PLN 151.95bn (or 8.83% of GDP) in 2014.
The ministry also reported that in 2013, this deficit will rise to over 4.8% of GDP from last year’s 3.9% of GDP.
In the spring, the Polish government targeted 3.5% of GDP for this year (and 3.3% for 2014). In May, the European Commission expected the figure at 3.9% of GDP in 2013 and at 4.1% of GDP in 2014.
The draft law amendment stipulates for writing off of T-bonds held by OFEs (i.e. 51.5% of their portfolio) on Feb 3 of 2014. Afterwards, the funds will be allowed to invest in, among others, equities, corporate and municipal bonds, mortgage bonds, revenue bonds, derivatives. The ministry of finance estimates that the value of bonds to be written off will amount to around PLN 120bn.

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