Markets and economists were critical of the plan the government announced in early September to move some of the privately run open pension funds’ (OFE) assets to the state-run ZUS program. Ratings agencies, however, mostly said the reform would be neutral for Poland’s rating. Both Fitch and Moody’s saw short-term positives in the reform, but worried about longer-term knock-on effects.
Ratings agency Fitch said the plan will not affect Poland’s credit rating, provided that the country makes appropriate changes in its legal system accounting for the drop in public debt. The country will have to lower its legal limits for the debt-to-GDP ratio corresponding to the sums gained from the transfer of assets. The move will bring the country closer to the countries with an “A” rating, the agency explained. Fitch currently gives Poland an “A minus” rating.
In August the agency lowered Poland’s outlook from “positive” to “stable” following the government’s decision to suspend its cautionary rules, which required imposing fiscal sanctions for breaching the 50 percent debt-to-GDP threshold.
Ratings agency Moody’s also said the government’s proposal does not significantly change its assessment of Poland’s credit rating. Moody’s analysts expect that the proposed changes to the pension funds will be introduced in mid-2014, taking the legislative process into account. If they are introduced before the end of this year, however, they will still affect finances in 2013, even if the transfer of bonds from OFEs to ZUS takes longer than a year. This will reduce the government’s debt-to-GDP ratio to 50 percent.
Moody’s analysts believe that changes in the Polish pension system will indeed improve public finances in the short term, but will increase the payments tied to pensions and reduce liquidity in the capital market.