Tusk announces major spending on defense and health care; only 1/3 of the money to cover these must be borrowed

It seemed that after the conference of Prime Minister Tusk and Minister Domański, during which they presented the draft budget for 2025 and called it the “budget of construction and strength”, the individual ministers would praise in the following days the large resources that they will have at their disposal to carry out the tasks that fall within their competence. However, nothing of the sort happened, but Prime Minister Tusk presented a one-minute video on his social media in which the narrator tells how much money was secured in this budget for national defense, social programs and other important purposes financed from the budget. However, this is not true, because in order to finance all these expenses it will be necessary to borrow almost 1/3 of the funds to cover them, while the planned budget revenues will only be enough to finance 2/3 of the planned expenses.

As indicated by the increase in macroeconomic indicators the day before the budget presentation, such as the forecast GDP growth from 3.7% to 3.9%, as well as the average annual inflation from 4.1% to 5%, they wanted to obtain a ‘paper’. report a last-minute increase in budget revenues, and with it an artificial reduction in the budget deficit, so that the national debt-to-GDP ratio does not exceed 60% at the end of 2025, i.e. the EU Maastricht criterion. This is what happened. Thanks to these accounting procedures, the national debt-to-GDP ratio was “only” 59.8%, which however means that it is more than 10 percentage points higher than in the previous year. percentage points higher than at the end of 2023, the last year of the rule of law. It is an unprecedented “achievement” in our post-1989 history that the government, in just two years of its tenure, has increased the national debt, according to EU definition, by as much as 10 percentage points.

Let us not forget that according to the draft budget for 2025, revenues will amount to about PLN 632 billion and expenditures will amount to almost PLN 922 billion, which means that the budget deficit will amount to PLN 289 billion, as I have already said, to cover the budget deficits. planned expenditures, 1/3 of the financial resources, the Tusk government will have to borrow. The second “achievement” of the Tusk government included in the draft budget is that the said deficit represents almost 50% of the planned budget revenues. In the history of budgets after 1989, such a situation has never occurred. And finally, the third “achievement” is that budget revenues in 2025 should be as much as 50 billion zlotys lower than the budget revenues planned for 2024, which in the situation of economic growth of 3.1% of GDP in 2024 and planned for 2025, at a rate of as much as 3.9% of GDP, is an almost unbelievable situation.

This is a direct reference to the situation of 2008-2015, i.e. the previous Platform government, when budget revenues, despite annual economic growth, increased by only PLN 35 billion for 8 years, in 2008 they amounted to almost PLN 254 ​​billion and in 2015 to PLN 289 billion. Let us not forget that during the eight years of Law and Justice, budget revenues more than doubled, from PLN 289 billion in 2015 to almost PLN 600 billion in 2023 (although Minister Domański showed PLN 574 billion, he did not take into account the financial consequences of the crisis). effects of the energy shields, fuel and food in the amount of about PLN 16 billion and from December 2023 to January 2024 as much as PLN 12 billion in VAT transferred using the accelerated refund mechanism). A few years later, the Sejm’s Investigative Committee showed that the source of the weak growth in budget revenues, despite the economic growth during the Platform’s rule, was massive VAT fraud, which amounted to more than PLN 250 billion in eight years. Unfortunately, it seems that after the Platform came to power again, the political consent for the “privatization” of taxes has returned, as the Minister of Finance has decided to plan revenues for 2025 as much as PLN 50 billion lower than in the current year.

Regardless of how this draft budget turns out, it is not true to say on the basis of the figures contained in it that a certain amount of money is guaranteed for a certain area of ​​our lives, because as much as 1/3 of the funds to cover these costs will have to be borrowed. A net financing requirement of PLN 366 billion is planned for 2025, and the fundamental question is whether borrowing such a large amount will not result in a much higher interest rate than before, which will have to be offered in order to place government bonds of such a huge value on the market.