Polish economist explains how SAFE borrowing benefits the country despite not being a windfall, as NBP’s foreign investments offset most borrowing costs.
Bond Issuance a Realistic Scenario
An economist speaking with DGP notes that while bond issuance is a realistic scenario, the key question concerns the calculation of costs and benefits. He emphasizes that the structure of expenditures is crucial.
SAFE Borrowing Requires Currency Conversion
Since approximately 80% of the funds are to be spent domestically, the government needs zlotys. However, SAFE provides a loan in euros, requiring conversion through the National Bank of Poland (NBP), which acts as an exchange office utilizing its money issuance privilege.
NBP Investments Neutralize SAFE Costs
In this model, the NBP invests the received euros in foreign assets. The interest rate obtained by the central bank is close to the cost of SAFE, causing these values to largely neutralize each other.
