Biznes Fakty
The Ministry of Finance has reached for reserves. The liquidity cushion is melting away
The Ministry of Finance is utilizing what is referred to as a liquidity cushion to ensure the state budget’s liquidity. This action may stem from the increasing budget deficit, as highlighted by the substantial issuance of treasury bonds, according to „Puls Biznesu”.
„By the end of April, the Ministry of Finance reported holding PLN 175 billion in budget accounts, as per data released by the ministry. The monthly report from the ministry clearly indicates that the liquidity cushion has been diminishing for the past two months,” it stated.
Furthermore, it was noted, „the MF’s reports indicated that the value of the reserve, which safeguards the liquidity of the state treasury, was PLN 21 billion lower in April compared to March.” „It also saw a significant decrease from the record level of PLN 204 billion reached in February,” it emphasized.
„Does this signify that the budget situation is deteriorating? On one hand, such a shift was anticipated. At the end of last year and the beginning of this year, the Ministry of Finance issued far more bonds than what was necessitated by immediate borrowing requirements. The budget deficit from last year was less than anticipated, allowing more funds to remain in the accounts from the outset. Additionally, actions like accelerating VAT refunds in December provided the ministry with greater flexibility in financing budget expenditures in January. In the first month of this year, the budget shortfall was only PLN 3.2 billion, or 1.1 percent of the total annual plan,” we read in „PB”.
The acceleration of deficit growth
The article mentioned that „bond sales proceeded as planned, and in the retail segment, the ministry set one record after another.” „This led to the formation of a record liquidity cushion, which amounted to PLN 204 billion by the end of February,” it was recalled.
„Conversely, the budget scenario began to shift rapidly in February and March. The acceleration of the deficit growth was evident, with the budget gap in February exceeding PLN 36.3 billion, and in March reaching PLN 76.3 billion. This accounts for over 26 percent of the annual plan, as the deficit limit set in the budget act is PLN 288.8 billion. Consequently, the ministry might start tapping into the liquidity cushion to meet current borrowing demands, which are projected to be at a record high this year,” it was emphasized.
