Republic of Poland: Arrangement Under the Flexible Credit Line and Cancellation of the Current Arrangement-Staff Report; Press Release; and Statement by the Executive Director for the Republic of Poland

KEY ISSUESBackground: Poland's strong fundamentals and sound policies helped it to successfullywithstand several bouts of market turbulence and paved the way for economicrecovery. While Poland has benefited from its continued transformation into a moreopen and dynamic economy, its substantial trade and financial linkages with globalmarkets, combined with still-large financing needs, also make it vulnerable to externalshocks.Outlook and risks: With only modest growth in its trading partners, economic activityin Poland is expected to remain moderate in the near term. Risks remain tilted to thedownside amid concerns about a protracted slowdown in the euro area, continuedgeopolitical tensions in the region, and uncertainty surrounding normalization ofmonetary policy in the United States. Domestically, the risk of continued disinflationremains high.Flexible Credit Line (FCL): Against this background, the authorities are requesting anew two-year precautionary FCL arrangement with proposed lower access in theamount of SDR 15.5 billion (918 percent of quota) and cancellation of the currentarrangement, approved on January 18, 2013. Poland's improved economicfundamentals and increased policy buffers have reduced financing needs. However,external risks remain elevated. In this context, the authorities consider that a new FCL inthe requested amount would provide an important insurance against external risks, helpsustain market confidence, and support their economic strategy. At the same time, theauthorities consider that the substantial reduction in access sends a clear signal of theirintention to fully exit from the FCL once external risks recede. In staff's view, Polandcontinues to meet the qualification criteria for access under the FCL arrangement.Fund liquidity: The impact of the proposed commitment of SDR 15.5 billion on Fundliquidity would be manageable.Process: An informal meeting to consult with the Executive Board on a possible FCLarrangement for Poland was held on December 19, 2014.