Poland’s public debt has exceeded the 60 percent limit set in EU law but the country’s own formula for calculating its indebtedness means that the 60 percent constitutional limit that would have forced the government to set a balanced budget has not been broken.
Data released by the finance ministry last week showed that, according to EU methodology for calculating public debt, it reached 61,6 percent of Poland’s GDP in the first quarter of 2026, up from the 59,7 percent in the last quarter of 2025.
Despite that rise, Poland’s debt burden remains below the EU average, which in the last quarter of 2025 was 81.7 percent with Poland remaining well short of the record levels set by southern European states such as Italy and Greece, both closing on the 150 percent mark
The rising debt in Poland has been driven by one of the fastest growing budget deficits in the EU, caused by increased defence and social spending.
Last year Poland’s budgetary deficit kept rising to 7,3 percent of GDP, the second highest level in the EU, leaving the Polish government target for 2025 of 5,5 percent well behind.
That budget deficit has been rising from 3,4 percent of GDP in 2022 to 5,2 percent in 2023, 6,4 percent in 2024.
Poland has already been placed under the EU’s excessive deficit procedure since 2024 that relates to its budget deficit surpassing the community’s 3 percent limit. Now the country has exceeded another fiscal threshold that triggers the EU’s excessive debt procedure.
Being covered by the excessive debt procedure means that a member state has to take steps to bring public finances under greater control.
Poland’s constitution sets 60 percent of GDP as a public debt limit, however since the methodology used by Poland for calculating that figure is different than the EU’s the country will not have to produce a balanced budget.
The reason for the difference between the EU methodology and the Polish methodology is that the latter excludes off-budget liabilities such as state managed special funds.
According to the Polish methodology public debt amounts to 50,6 percent of GDP, significantly below the limit. The figure is also below the 55 percent limit that according to Poland’s fiscal rules would trigger the government to take steps to reduce the debt ratio in the following year.
Given that 2027 is the year of the parliamentary elections the government has been keen to avoid having to take measures such as freezing the indexation of welfare benefits and public sector wages.
The electoral calendar has put pressure on successive governments to move spending to be outside of the central budget to give them additional elbow room to fund public spending without breaching fiscal and constitutional rules.
However, massaging of debt statistics does not make it any easier to fund. Repayment of debt will increase across the whole of the public sector.
The Polish finance ministry acknowledges this and in its analysis expects the rise in the level of public debt to continue over the coming year, reaching 75 percent in 2029.
According to the EU methodology which embraces a much wider spectrum of public spending, public debt in Poland has increased by 25,6 billion Euro in the first quarter of this year and now amounts to more than 600 billion Euro.
The cost of servicing this debt with interest payments alone over the previous year was close to 20 billion Euro representing 2,1 percent of GDP.
It was their concern about the mounting public debt and the budget deficits which led two of the big three rating agencies, Fitch and Moody’s, to revise Poland’s outlook from stable to negative in 2025.
This means that there may be future credit-rating downgrades that will mean borrowing will become more expensive for Poland.
The political gridlock between the ruling centre-left government led by Prime Minister Donald Tusk and the Conservative (PiS) aligned President Karol Nawrocki affects the situation because it means there is no agreement on legislation that might bring down the deficit, either by cuts in some public expenditure or increasing the tax yield.
The President himself has expressed his concern about the state of the public finances when on signing the 2026 budget, something he had to do,since according to the constitution it is the only legislative act the President may not veto, he criticized its impact on the level of debt and noted that it was the second year in a row in which the deficit represented almost a third of total public spending.
Nawrocki in 2025 stood for election on a platform that he would oppose increases in taxes on individuals and small business as he sees lower taxes as a way of increasing tax yields via generating higher growth.
The only tax increases the head of state will accept are those on big business. Last year he accepted without veto legislation to place a special levy on banks.
The Tusk government, facing the electorate next year, is reluctant to push for expenditure cuts, which it suspects the President would veto anyway and reluctant to go down the road of tax cuts as it fears that in the short term they would accelerate the budget deficit.
But while Poland is achieving the highest economic growth figures in the EU of close to 4 percent it is likely that Poland’s politicians will continue to kick the can down the road.
Demand for Polish bonds remains strong, meaning investors are still keen on buying Polish debt, and most of it is issued domestically and denominated in Poland’s currency, the zloty (PLN), thereby reducing the exchange risk.
This means that tough decisions on raising taxes such as VAT, CIT or PIT together with any spending cuts will be rejected on the grounds that they could hurt economic growth.
Debt continues to be the least unattractive option for plugging the gap.
