Jacek Rostowski Courtesy of the European Parliament

Polish Finance Minister Jacek Rostowski has proposed that the National Bank of Poland could buy back government bonds on the secondary market as a “short-term measure” to help bridge the budget gap.

“There’s no ban on the central bank buying government bonds on the secondary market,” Mr Rostowski told the Polish edition of Newsweek. “If yields increased as a result of panic or contagion from an external virus, and not poor public-finance management, it might be expedient for the central bank to intervene.”

Shortly following the publication of the interview, the NBP posted a comment on its website. Quoting the constitution, the note said that despite there being no legal ban from intervening on the bonds market, “the NBP's responsibility [is] for 'promoting the stability of the domestic financial system.' This means that the purchase of bonds on the secondary market by the NBP could take place only in exceptional situations of deep crisis, when the stability of the domestic financial system is compromised.”

The central bank added that such a move could “lead to undesirable perception of this information by financial markets.” This could in turn cause uncertainty resulting in increased volatility in bond prices and exchange rates.

“The independence of the central bank is not a dogma, but it is recognized as one of the greatest achievements of democracy,” Ryszard Petru, the head of the Society of Polish Economists, told Gazeta Wyborcza. “If the government cannot sell bonds, it should ask for help from the NBP, but can always use the IMF loan.”

In the Newsweek interview Minister Rostowski added that Poland's GDP could grow by three to four percent even with growth in the euro at zero.

Roberto Galea