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Poles want IMF credit

nda/ncy, ap/afp/reutersApril 15, 2009

Poland on Tuesday said it planned to ask the IMF for a $20-billion (15-billion-euro) credit line to bolster reserves and fend off currency attacks as it bucks the recession.

A graphic showing a Polish flag, a dollar bill and the IMF seal
Poland wants to take advantage of the IMF's Flexible Credit Line

Finance Minister Jan Rostowski told reporters that Warsaw had asked the International Monetary Fund to open a "Flexible Credit Line" (FCL), a strings-free program designed to encourage countries to act proactively to combat the financial crisis.

"This will increase the reserves of the Polish central bank by one third... to immunize Poland against the virus of the crisis and the attacks of speculators," Rostowski said. "This isn't emergency funding," he insisted.

"I can say that during talks with the IMF it was clear that Poland is considered a pillar of stability in the region" and that the IMF aimed to reinforce that role, he added.

"This in an instrument, thanks to which we are getting priceless insurance policy in the time of a global uncertainty," Deputy Finance Minister Ludwik Kotecki told Reuters.

The European Union's largest ex-communist member, Poland is in better shape than the region's other emerging economies, such as Hungary, Latvia and Romania - all of which have received outside funds.

It has previously been reluctant to flag any need for additional funding, even though it suffered from an evaporation of capital due to the credit crunch and worries over the region's growth and financing.

IMF chief has no problems with Poland's request

International Monetary Fund's Managing Director Dominique Strauss-Kahn
Stauss-Kahn said Poland had a solid financial recordImage: picture-alliance/ dpa

IMF head Dominique Strauss-Kahn welcomed Poland's move, noting its "economic fundamentals and policy framework are strong, and the Polish authorities have demonstrated a commitment to maintaining this solid record."

Strauss-Kahn said he expected the fund to move quickly with an approval. Deputy Finance Minister Kotecki said Poland may get the credit line as soon as next week.

Poland followed the lead of Mexico, which announced on March 31 that it would activate an FCL worth up to $40 billion.

The FCL is the result of a reform announced March 24 by the IMF. In a sharp break with past practices, the global lender unveiled the new instrument designed for countries deemed as having "very strong fundamentals, policies, and track records of policy implementation."

The credit line has no conditions, no limit on the amount of money that can be borrowed, can be drawn on at any time, and can be used to confront a crisis or as a "precautionary instrument" to prevent one.

Under the terms of the FCL, the credit line initially can be for six months, or 12 months with a review of eligibility at the six-month mark. Its repayment period extends to between three years and three months, to five years.

A loan for Poland is a loan for stability, say analysts

A map of Poland
Poland is a stable nation in a region of financial instability

Poland is a rarity because it expects economic growth this year. Warsaw has been battling to dissociate itself from the grim regional picture in other eastern European states that are facing some of the sharpest recessions in the EU.

"Polish fundamentals stand out relative to regional peers," said Manik Narain, an analyst at Standard Chartered, in a statement.

Independent Polish analyst Marek Zuber told AFP that "if one bolsters Poland, one bolsters the whole region."

"A loan to Poland isn't a loan to one country ... It's about boosting the strongest link," he added.

The economy of this country of 38 million people has been in robust health over recent years, notably since the ex-communist state joined the European Union in 2004.

In 2007 it grew 6.7 percent. In 2008 the rate was a still-credible 4.8 percent.

Polish authorities forecast growth of between 0.3 percent and 1.9 percent this year while the European Commission, the 27-nation EU's executive body, is expecting around 2.0 percent.

Keeping the zloty afloat

Despite the relatively rosy outlook, Poland's currency, the zloty, has found itself under attack.

A market in Poland
Poles and the Zloty took a battering earlier this yearImage: picture-alliance / dpa

In mid-February it plunged to a five-year low point of 4.92 to the euro - marking a 40-percent fall since July 2008 and making it the world's most beleaguered currency despite the recession-bucking forecasts.

At the time, Warsaw announced it was prepared to intervene if the zloty fell to 5.0 to the euro - and the government subsequently made what it called a "routine" sale of euros from its coffers, pulling the rate back to 4.68, and it has since climbed further.

Poland's government has some 150 billion zlotys (currently 35 billion euros, $46 billion) of debt to refinance in 2009 and some analysts had earlier voiced fears the credit crunch may put strong upward pressure on the yields offered by the country of 38 million.