And Its Positive Impact On Fiscal Stability For Poland’s III Republic
When one travels to Poland today, one is struck by how much progress has taken place since the breakdown of the communist regime. Modern buildings are being built through many of the cities, expensive cars flood the roads, and quality products from Poland and elsewhere fill the stores and shops. American and English phrases, music, and films have permeated the social scene.
What a contrast to communism and its sociorealism!
Yet despite this quantum leap, Poland still retains its historic essence in that one can feel the one thousand years plus of history and its historic role as defender of western Christian civilization and values in Europe.
Of the many things and ideas recently reestablished in the „new” Poland, the concept of representative democracy and prudent government fiscal policy has taken root, and their implementation reflects both Poland’s historical experiences as well as lessons learned from other Western countries whose socioeconomic development was not stymied by communist brutes.
Poland reverted to a parliamentary democracy with the Prime Minister heading the executive branch. He (and even in the past She) formulates a government and assembles a cabinet to execute the governmental programs. An acknowledged critical member for the execution of the government’ s policies is the Ministry of Finance headed by the minister who just also happens to be Vice Premier. In Poland’s case, the minister is Leszek Balcerowicz. He is now very well respected in Western circles as formulator and implementor of Poland’s’ shock therapy which rapidly erased many of the archaic vestiges from the communist economic system.

One of the first problems that he and his staff addressed was to run government on a sound fiscal basis. A budget once adopted by parliament had to live within its means, and shortfalls in revenue had to be financed via public debt. No more funny communist money printed mindlessly to cover budget shortages.
Thus the growing „new” Polish III Republic began its process of selling Treasury bills, notes, and bonds to the public through the Ministry of Finance’s Bureau of Public Debt and the Polish Treasury market was reborn.
At first look, the governmental financing system looks and feels American and appears to be an imported concept, yet the concept of financing the government is in reality not new to Poland. Historical archives contain many examples of past Polish Treasury securities. King Stanislaw August Poniatowski issued a five percent bond in 1782, and later at each critical juncture of Poland’s history whenever there was an uprising attempting to reconstitute the Polish state, the nascent government issued Treasuries, e.g. a six percent note from the period of the November Uprising for 500 zloties issued June 25, 1831; provisional national subscription bonds for 500 zloties issued during the January uprising 1863; and five percent bonds issued in Warsaw for 500 marks on March 13, 1920. Not only did Poland issue Treasuries within Poland but it also had success with foreign investors gaining their confidence as a country worthy of investment, e.g. a seven percent stabilization loan for the Republic of Poland in the amount of 2,000,000 pounds sterling issued in Warsaw October 15, 1927.

In March of 1991, the Sejm passed the legal framework for the establishment of Treasury operations. It outlined the responsibilities of the main institutions which are: Ministry of Finance – the issuer of Treasuries, Securities’ Commission – regulates investment markets, National Bank of Poland – the issuing agent and the depository clearing agent for the T bill market and the organizer of auctions for T-bills and T-bonds (Mr. Greenspan would feel right at home!), Bank Polska Kasa Opieka S.A. (Pekao) the issue agent for one and three year bonds sold through its retail network, recognized institutions necessary for the issuance of foreign bonds, National Securities’ Depository – records ownership of securities and clearing, the Stock Exchange – an institution organizing the buying and selling of securities and Treasuries, and Stock brokerage houses – entities operating as intermediaries for investors one of which is Groupa Pekao.

With this legal framework established, just two months passed, and the first T- bill auction was held. It was a success, and the Ministry of Finance has gone on to issue one and three year inflation indexed notes, two and five year fixed interest bonds, and ten year variable interest rate bonds. The impact upon the Polish economy has been tremendously positive. A Treasury market has been established with the National Bank of Poland conducting T-bill auctions every Monday. Banks, insurance companies and ordinary citizens have gained confidence in the zloty as they seek to invest it in various Treasuries. Bonds worth millions of zloties are being bought and sold daily on the Warsaw Stock Exchange, and the Warsaw Board of Trade, established with the help of the Chicago Board of Trade, trades bond futures contracts. Real rates of return are being generated increasing the capital base of the country for further investments. Inflation, which was once at an all time high of 590%, is presently a single digit per year. The government’s budget deficits are being financed leading to a climate of political and economic stability. With all of this hustle and bustle of economic and financial activity, the fact remains that the Polish government needs this Treasury market to meet the expectations and demands of the citizenry. There is not enough revenue yet for all expenditures. Presently about 10 -12 % of the budget is being met via this financing.

So with all of these resources available to the Polish government, one may thus ask how are the expen – ditures of the budget being spent.
Well, it is interesting to note that just as in the United States the largest category of US federal government outlays is for Social Security and Medicare, it so too is in Poland. The largest expenditure within the Polish national budget is for social security – approximately 60%. The second largest category is for health care. So Dziadzia and Busia on the farm look towards the Polish government for their social security checks with the same anticipation as the millions of US senior citizens in America look towards the US federal government for their Social Security checks. Unfortunately for the seniors in Poland however, their retirement benefits are at most one quarter that of America’s or other Western countries. The generation that suffered the most under Nazi and Communist occupation has to live a meager retirement because of the ravaging negative impacts on Poland’ s most recent history. It is not an irony to state that World War II finished in Poland 45 years after the fall of Berlin.

Polonians have in the past created armies for Poland and have sent food, medical supplies, and all other types of aid to Poland. Now we can participate in the most modern way to aid Poland’s development by using well-known and practiced principles of finance. Poland is not only a place to visit but it is a country that you can invest in and earn returns too! Ten years have passed since the breakup of Communist rule in Poland. Within this time frame, the Polish nation has leapt forward like a coiled spring to implement many needed reforms to its economic and political system, one of which was the implementation of sound fiscal ideas for running the government.
The recreation of Poland’s Treasury market brings many financial benefits to all persons and institutions both within Poland and to foreigners not the least of which is the opportunity for a person to become an investor in Poland’s development.
By considering an investment in Polish bonds, a person not only helps the Polish government meet the most direct needs of its citizens, but also rewards the investor with an attractive return for the use of their money.

The author, Andrew Tokarz, is a registered investment advisorinvolved in stocks, bonds, derivatives, futures, and forex.
Owner of GOLCONDA INVESTMENTS, INC. He is available for consultation at
1-800-956-9156 or

6332 S. Archer, Chicago, IL 60638
Tel 773/ 284-0978 Fax 773/ 284 -1438

Maybe your grandparents came from there,
or maybe you visited there, and now
recent yields were 15.8%

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The securities are not being offered to the residents of this state and an offer is not otherwise specifically directed to any person in this state by or on behalf of the issuer of the securities Golconda Investments, Inc.

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Andrew Tokarz, Pres.
Stocks, Funds, Futures, Currencies

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