Poland to cut EU Recovery plan loans by $5.9 billion, minister says

WARSAW (Reuters) -Poland will cut the amount of money it takes in cheap loans from the European Union's post COVID-19 Recovery and Resilience Facility by 21.5 billion zlotys ($5.87 billion), the Funds and Regional Policy Minister said on Friday.

Warsaw is grappling to bring its finances in check after two ratings agencies lowered Poland's outlook to negative, citing high deficits and debt as well as a lack of progress on fiscal consolidation.

It also does not have a lot of time to use the EU funds before an August 2026 deadline, as their disbursement was held up due to a row with Brussels over democratic standards under the previous government.

"We reviewed investments and demand for these investments, including for loans for companies, and the decision was made not to use these funds," Katarzyna Pelczynska-Nalecz told journalists.

Poland can receive nearly 60 billion euros ($70 billion) from the fund designed to help EU countries bounce back from the pandemic, made up of 25.3 billion euros in grants and 34.5 billion euros in loans.

With the time left to spend the money decreasing, Poland focused on making the most of the grants while treating the loans as a fallback, a senior official told Reuters last year.

Pelczynska-Nalecz said Poland would still use up the vast majority of the available loans.

The loans are classified as government debt even though they will be repaid by the final beneficiaries — such as businesses and local governments — over a longer time horizon.

Finance Minister Andrzej Domanski said last month that the public debt-to-GDP ratio will reach 66.8% by the end of 2026, but adjusting for the loan portion of the fund that would fall to 63.7%.

($1 = 3.6615 zlotys)

($1 = 0.8570 euros)

(Reporting by Pawel Florkiewicz, Anna Wlodarczak-Semczuk and Marek Strzelecki; Editing by Kirsten Donovan)