US embassy cable - 05WARSAW966

UNCLAS WARSAW 000966 
 
SIPDIS 
 
 
Sensitive 
 
STATE FOR EUR/NCE TARA ERATH AND MICHAEL SESSUMS 
STATE FOR EB/OMA TIM FORSYTH 
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON 
TREASURY FOR OASIA MATTHEW GAERTNER 
FRANKFURT FOR TREASURY JIM WALLAR 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, PREL, PL, Economy 
SUBJECT:  Polish Ministry of Finance Reorganizes Debt 
Department 
 
Ref: Warsaw 742 and previous 
 
 (U) This cable is sensitive, but unclassified, and NOT for 
Internet distribution. 
 
1. (U) At the end of January, the Ministry of Finance 
reorganized its debt department, creating a unified 
department from two formerly separate units, one for foreign 
debt and one for domestic debt.  Pawel Kowalewski, the new 
head of the unified department, explained to Econoffs that 
this unification is the first step on the road to the 
Ministry's ultimate goal of creating an independent agency 
to manage Poland's official debt.  In MOF's view, an 
independent agency would be more immune to potential 
political pressure regarding official debt, which in turn 
could help lower the market's risk rating for Poland. 
 
2. (SBU) Jacek Tomorowicz, the head of MOF's foreign 
relations department, told Econoff that the merging of the 
two offices also reflected a growing maturity in Poland's 
debt management capacity.  At one time, the primary purpose 
of Poland's foreign borrowing was to repay foreign loans. 
As Poland moves to repay the last of the old communist-era 
debts (through an offer to repay outstanding Paris Club debt 
early, reftel), this strategy has come to an end.  For the 
last three years, Poland has increasingly turned to foreign 
markets to take advantage of opportunities to finance budget 
operations on better terms than those offered in the 
domestic debt market.  Tomorowicz also noted that it makes 
less sense for Poland to maintain separate debt offices as 
it approaches adopting the Euro (expected by 2009 or 2010). 
Kowalewski explained that potential buyers of Polish bonds 
are looking for a clearer picture of Poland's overall debt 
performance.  Over the coming months, Finance will issue 
updated statistics integrating domestic and foreign issues 
to show its blended maturities and yields.  Kowalewski 
believes this will make Polish bonds more transparent for 
markets, which in turn will help the ministry extend average 
maturities.  MOF is pleased that it has extended average 
maturities beyond two years (currently, the average of 
outstanding bonds is 2.4 years).  The ministry hopes to 
increase the average to 3 years by 2006, with an ultimate 
goal of an average maturity of 4 years in the medium-term. 
At the end of 2003, the GOP's total foreign debt was 128.5 
billion Zloty ($35 billion at the then-current exchange 
rate). 
 
Munter 
 
 
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 2005WARSAW00966 - Classification: UNCLASSIFIED