Fiscal Strain: Poland's Fuel Price Cut Controversy

The Polish Fiscal Council criticizes Poland's expensive and poorly targeted measures to lower fuel prices, highlighting risks for inflation and a potential budget amendment. The costly interventions, aimed at reducing VAT and excise duty, could push the budget deficit to 7.2% of GDP and increase economic uncertainty.

In a critical assessment, the Polish Fiscal Council has lambasted the government's efforts to curb fuel prices, deeming them poorly targeted and financially burdensome. The Council warns these measures may provoke inflation and necessitate a budget amendment if continued through the year.

The initiative, designed to lower VAT and excise duties, is running at a cost of 1.6 billion zlotys monthly. This could raise the fiscal deficit 0.37% above current projections, pushing it to 7.2% of GDP, the highest in the EU according to European Commission forecasts.

Business sectors like transport and logistics could pass on costs to consumers, further inflating prices. The fiscal council, operational since January, calls for a credible exit strategy to avert economic instability and unpredictable fiscal policy.

(With inputs from agencies.)