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October 5, 2022
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The National Bank of Poland (NBP) has recently taken two important decisions. First, it intervened in the market to weaken the zloty. In addition, the bank’s president, Adam Glapiński, suggested this week that further interest rate cuts are real in Q1 2021. What is our central bank striving for?

Does the National Bank of Poland have a plan?

Note that the zloty is relatively expensive today in relation to e.g. the dollar. This has a negative impact on certain branches of the economy (e.g. exports). So, will the NBP try to weaken our currency? Or is it something else? The country’s indebtedness has risen sharply recently. Is the conscious pursuit of the devaluation of the zloty an idea for easier repayment of this debt?

“The first possibility is that the bank wants to increase its profit generated on foreign exchange reserves and thus increase its contribution to the state budget in 2021. It manages reserves worth approx. EUR 120 billion and Each weakening of the Polish currency means that at the end of the year he can report a profit. Theoretically, the surplus generated in this way should be put aside for the future in the form of a reserve to cover losses in the period of zloty appreciation. Currently, however, the NBP conducts a different policy – it pays everything to the budget “

– notes the portal bankier.pl.

However, as he adds, “The problem with this explanation of the NBP’s activity is that the scale of support that the bank can therefore provide to the state treasury is disproportionately small in relation to the scale of borrowing needs, significantly exceeding PLN 100 billion. It is doubtful that the profit from the NBP would constitute any significant relief for the government ”.

Willingness to trigger an economic boom?

Or maybe low interest rates. (in practice, zero, and even – when we analyze the scale of inflation – negative) is an attempt to stimulate the economy, which is entering the period of recession? However, this is a dangerous move. If consumers are provoked to over-buy goods and services in 2021, the result could be e.g. much higher inflation. Now, in the reports of the Central Statistical Office, it is at the level of over 3 percent. Will it amount to, for example, 6 percent next year? or more?

Another explanation tosses it up again bankier.pl:

“It is possible that we are seeing the start of a new industrial policy to maintain a weak currency. The point is not that the euro would cost PLN 6 in a year, but to keep the exchange rate closer to the current level than before the crisis (i.e. closer to PLN 4.5 than PLN 4.1). The aim of this policy, I believe, is to make exporters more competitive at a time when international supply chains are reshuffling. Many foreign producers are looking for suppliers in Poland, companies have a chance for long-term contracts, and if the starting price is attractive, there may be more contracts. “

Apparently, the majority of PiS politicians is convinced that it is worth supporting exports more, and for this they need a weak zloty.

In any case, the NBP’s experiments may have fatal consequences, faster than we expect …

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