Debts in local governments are growing
Local government coffers may lack up to PLN 30 billion this year to cover current expenses.
Marek Wójcik of the Association of Polish Cities says that many local governments have found themselves in a very difficult financial situation. They may lack 20-30 billion zlotys to cover current expenses. On top of that, there will be several billion for the growing installments of loans, which were not provided for in the budget.
Local governments are grasping at any way that will allow them to pin down expenses with revenues. One of them is to roll over debt by paying off loans with bonds.
The most difficult situation is in counties that have no revenue of their own. The Union of Polish Counties has asked the Finance Ministry to suspend the application of the prudential rule. This would allow them to go into debt over statutory limits. Otherwise, they urgently need PLN 8 billion.
Piotr Tomaszewski, treasurer of Bydgoszcz, explains that local governments’ financial problems are the result of legal changes. In 2019, the government introduced a law reducing the value of the local government’s share of PIT revenues. More than PLN 50 million evaporated from the Bydgoszcz budget’s coffers. PIT income was also reduced by the Polish Deal, this time by as much as about PLN 140 million. In addition, rising borrowing costs and high inflation are a problem.