Members of the NBP board sent an open letter to the chairman of the Sejm. The signatories defended President Adam Glapiński.
In a letter to Szymon Hołownia, members of the NBP board of directors assured that the actions of the Bank and its president “pursued the economic interests of the Republic of Poland.”
They also call on the Chairman of the Sejm to forward this letter to all members of the National Assembly.
Open letter from members of the NBP Board of Directors to the Chairman of the Sejm of the Republic of Poland
FULL CONTENT OF THE LETTER:
Dear Mr. Speaker, in recent weeks, representatives of the coalition that entrusted you with the positions of Chairman of the Sejm have repeated their announcements to bring the President of the NBP, Professor Adam Glapiński, before the State Tribunal for the ineffective fight against inflation and the purchase of government bonds during the COVID period. These accusations are unfounded. The actions of the NBP and its President in 2020-2023 were based on the best economic knowledge, pursued the economic interests of the Republic of Poland and were in accordance with the law.
Inflation in Poland was caused by the post-pandemic crisis and Russian aggression against Ukraine. This phenomenon occurred in a number of countries around the world, with greater intensity in Central and Eastern Europe.
In response to the rise in inflation, the Monetary Policy Council has raised interest rates. The total scale of increases in the NBP benchmark rate from October 2021 to September 2022 was 6.65 percentage points and was the largest in the history of the Monetary Policy Council. In the period from September 2022 to August 2023, the NBP reference rate was at the highest level of the NBP inflation target at current levels (i.e. since 2004). Interest rates were raised earlier and on a larger scale than in the eurozone (nine months earlier) and the US (almost half a year earlier). In July 2022, when the European Central Bank (ECB) deposit rate was -0.50%, the NBP reference rate was already 6.50%.
The increase in the benchmark interest rate has contributed to a rapid decline in inflation, from 18.4% in February this year. to 6.6% in October this year. in subsequent months this trend will continue, although monthly deviations are possible.
In response to the outbreak of the COVID-19 pandemic and the associated risk of a sharp long-term decline in GDP, which could threaten price stability in the medium term, the NBP from March 2020 to March 2020 purchase transactions carried out on bonds issued or guaranteed by the Ministry of Finance. November 2021. These operations were fully in accordance with the Constitution of the Republic of Poland, which is stated in art. 227(1) that the NBP has the exclusive right to determine and implement monetary policy. Critics of the NBP argue that the purchase of bonds violated art. 220(2) of the Constitution: the Budget Law cannot provide for the coverage of the budget deficit by incurring obligations of the central bank of the state. This claim is obviously unfounded. The said provision is addressed to the Sejm, which takes over the state budget, and stems from the practice of the early 1990s, when budgets provided for the financing of a specific part of the deficit through central bank debt. Article 220(2) does not prohibit any activity of the NBP, which, as mentioned, has the exclusive authority to conduct monetary policy. What’s more, art. 48, paragraph 2 of the Law on the National Bank of Poland provides that the NBP may sell and purchase debt securities in open market operations.
These transactions were executed by the NBP in accordance with the practice of other central banks. In particular, this instrument has been used for many years by the US Federal Reserve, the ECB and the Bank of England. In response to the pandemic crisis, around 40 central banks have purchased assets. The total size of asset purchases by the NBP for 2019 amounted to 6.3% of GDP (PLN 144 billion, i.e. approximately BUR 33.5 billion). The size of asset purchases relative to GDP was much smaller in Poland than in developed economies, and about three times smaller than in the US and the Eurozone.
NBP’s asset purchases took place exclusively on the secondary market, through open, transparent auctions with banks. Dates of individual operations are included in the monthly NBP announcements. Before each auction, the market was informed about the bonds selected for purchase (on the Thomson Reuters and Bloomberg websites). The messages contain information about the pool of activities, the settlement date of the transaction and the amount of interest accrued on each of the series purchased. When accepting offers from banks, the NBP took into account the current level of market quotations; some offers (the least attractive in terms of price) were rejected.
In June 2023, the IMF declared that the increases in NBP interest rates were appropriate and effective: the Monetary Policy Council accordingly raised interest rates from near zero in 2021 to 6.75%, and went into a pause in October 2022. This tightening was effective in dampening activity through the interest rate channel and the credit channel. The bond purchases were also positively assessed by the IMF, which noted that with the outbreak of the pandemic, monetary policy was eased quickly and appropriately. The asset purchase program implemented by the Central Bank will effectively guarantee liquidity in the government bond market and strengthen the transmission of monetary policy” (Report on the Review of the Polish Economy under Article IV of the IMF Statute ). NBP’s asset purchase did not violate the provisions of the Treaty on the Functioning of the EU. The ECB, which oversees such activities by EU central banks, has not objected to the NBP’s purchasing program. There are also vague complaints about the apolitical nature of the position. They are so unspecific that it can be concluded that the only mistake of the NBP president is the fact that the coalition formed after October 15, 2023 would have seen someone else in this position. This allows us to state that the purpose of the public consideration of the possibility of using procedures leading to the dismissal of the incumbent president of the NBP is an attempt to put unnecessary pressure on the central bank and its bodies , thus violating the laws of the central bank. independence of the National Bank of Poland, guaranteed by the norms of the Constitution of the Republic of Poland and legal acts of the European Union.
The NBP’s actions in 2020-2023 saved our country from economic collapse and subsequently suppressed inflation, which was mainly a result of the Covid pandemic and Russian policies. Therefore, bringing the NBP President before the Tribunate of State would be a punishment for the exemplary performance of his duties.
We kindly request the Speaker to forward this letter to all members of the National Assembly. Due to the importance of the matter, this letter is in the form of an open letter and will be communicated to the public 24 hours after it is sent to your office.
The letter was signed by: Adam Lipiński, Paweł Szałamacha, Piotr Pogonowski, Marta Gajęcka, Marta Kightley and Rafał Sura.
mly/NBP
Source: wPolityce
Emma Matthew is a political analyst for “Social Bites”. With a keen understanding of the inner workings of government and a passion for politics, she provides insightful and informative coverage of the latest political developments.