Prime Minister Donald Tusk

Out of all the proposals Prime Minister Donald Tusk put forward in his October 12 speech to parliament, his plan for a special investment vehicle to be managed by the state-owned Bank Gospodarstwa Krajowego (BGK), attracted the greatest amount of interest – and questions.

In his speech, Mr Tusk announced the creation of the investment vehicle, called “Polish Investments,” which is due have zł.40 billion in funds by 2015 – all to be managed by BGK. The funds would be lent to firms, mostly SMEs, for investment in Poland. The program would be financed “without increasing public debt” but by “exploiting frozen assets of state-owned firms,” Prime Minister Tusk said.

Finance Minister Jacek Rostowski and his counterpart in the Treasury Ministry, Mikołaj Budzanowski, tried to shed more light on the PM’s proposal the next day.

Mr Rostowski said BGK would receive shares of state-owned firms, and after these shares are sold off, the funds from those shares will “recapitalize the bank and increase its lending potential.”

“We will select well-prepared, profitable projects and invest in them,” he added.

Treasury Minister Budza-nowski said that the state would still keep control of “strategic” firms. The Treasury has not revealed which state-owned firms will see their shares transferred to BGK.

Nevertheless, the government says that the value of the shares the bank will receive is roughly zł.10 billion. With that money at hand, BGK will then be able to raise some zł.30 billion in financing, likely by simply borrowing money from other banks or issuing bonds.

The shares, along with the newly raised capital, come to the zł.40 billion in the government’s plan.

BGK will also guarantee up to 60 percent of the value of other banks’ loans granted to companies under the investment program. BGK is due to begin issuing loans to investors in 2013. Loans of up to zł.3.5 million will be guaranteed for a maximum of 27 months.

According to the government, the program aims to “enable SMEs access to credit during the economic slowdown, offer banks security tools against loan risk with a credibility [guarantee] equivalent to the guarantee of the State Treasury.”

BGK currently has an AAA long-term credit rating on domestic loans from Fitch. The bank made a net profit of zł.270 million in H1 of this year.