WARSAW, December 21, 2025: The International Monetary Fund (IMF) has urged Poland to tighten fiscal discipline as the country’s public debt rises at one of the fastest rates in the European Union. The Fund’s latest Article IV review warns that without a credible plan to curb spending and stabilise finances, the government risks undermining recent economic gains. Poland’s public debt, including off-budget borrowing and local government obligations, stood at around 58 percent of gross domestic product (GDP) in the second quarter of 2025, up sharply from 52 percent two years earlier. Although still below the EU’s 60 percent ceiling, the pace of increase has led the IMF to raise Poland’s debt-risk classification from “low” to “medium.”
The Fund said the country’s debt trajectory reflects expanding expenditure commitments combined with slowing revenue growth. According to IMF projections, Poland’s fiscal deficit will reach about 6.9 percent of GDP this year, driven by higher spending on defence, social programmes, and public sector wages. The Fund forecasts public debt to climb toward 60 percent of GDP by year-end and as high as 70 percent by 2030 if current policies continue. Rising interest rates and refinancing costs have added to fiscal pressure, with debt servicing now accounting for close to two percent of GDP and expected to increase further as older, cheaper debt is replaced with new, more expensive obligations.
The IMF noted that Poland’s public expenditure now resembles that of more advanced European economies, while its revenue base remains limited in comparison to regional peers. It recommended gradual fiscal consolidation to preserve growth while maintaining investor confidence. The Fund’s report emphasised that Poland should prioritise curbing spending growth and strengthening revenue collection through structural improvements in tax compliance and efficiency. The government, led by Prime Minister Donald Tusk, has attributed the larger deficit to increased defence and social welfare spending, citing the need to support national security and household consumption amid regional instability and elevated living costs.
Rising expenditure puts strain on fiscal stability
Budget plans for 2025 assume continued fiscal expansion, with limited adjustments expected next year. Political divisions have complicated efforts to introduce new taxes or reduce subsidies, making fiscal tightening difficult ahead of scheduled local and parliamentary elections. Poland’s macroeconomic performance remains broadly stable. The economy has shown steady growth, supported by private consumption, moderate inflation, and inflows from European Union investment programs. Unemployment remains low, and the banking sector is well-capitalised. The IMF acknowledged these strengths but cautioned that sustained fiscal imbalances could limit future policy flexibility, especially if growth moderates or borrowing costs rise further.
The European Commission’s autumn forecast similarly points to growing fiscal pressures. It estimates that without corrective measures, Poland’s debt ratio could reach between 70 and 76 percent of GDP by the end of the decade. The Commission noted that while Poland continues to attract foreign investment and maintain strong domestic demand, rising debt levels could reduce fiscal space for long-term infrastructure and innovation projects. Credit rating agencies have also adjusted their outlooks in recent months, reflecting concerns over slower fiscal consolidation.
IMF underscores urgency of maintaining fiscal discipline
While Poland’s ratings remain within investment grade, analysts have noted that further deterioration in the deficit or higher borrowing costs could trigger reassessment. The Ministry of Finance has said it remains committed to keeping public debt below the EU threshold and within domestic constitutional limits. The IMF concluded that Poland’s debt level does not yet pose an immediate risk to financial stability but underscored the importance of prompt policy action. It recommended that the government implement a credible medium-term fiscal framework aimed at reducing the deficit, restraining recurrent expenditure, and maintaining adequate buffers to absorb potential shocks.
Poland’s public finances are therefore at a crossroads, with the economy expanding but fiscal vulnerabilities intensifying. The IMF’s call for prudent management underscores the need for consistent policy coordination to ensure that debt dynamics remain sustainable and that the country’s economic resilience is preserved in the years ahead. As fiscal pressures mount, maintaining investor confidence and protecting long-term growth will depend on transparent policymaking, disciplined budget execution, and adherence to EU fiscal standards. – By EuroWire News Desk.