Poland said it will inject capital into and grant new powers to its state bank BGK, making it a major investor in the largest central European economy, in a bid to revive economic growth but keep fiscal deficits in check at the same time.
With the private sector reluctant to engage its capital given risks of another flare-up of the euro zone crisis, Poland is following the examples of Germany and South Korea from the past, boosting the role of a state-owned development bank.
Poland plans to redirect part of its privatisation revenues to BGK starting from 2013 to increase its capital and through leverage allow it to finance and initiate key infrastructure and investment projects.
"This is what effective anti-crisis policy is," Finance Minister Jacek Rostowski said at a conference on Saturday. "We are creating a mechanism that will facilitate long-term investments."
Poland was the only European Union member to avoid recession since the crisis erupted in 2008, but the economy has slowed sharply, hit by government budget cuts and a slump in the euro zone, the region's main trade and banking partner.
Investment in road-building and other infrastructure projects has driven Polish growth up to now, yet the European cash that paid for it will dip over the next two years.
Rostowski added that BGK, which is to issue bonds on the market after recapitalisation to further augment its lending capacity, is not part of the public finance sector and hence its liabilities would not affect state debt under EU accounting rules.
Poland aims to cut its fiscal deficit to around 3.5 percent of gross domestic product this year from 5.1 percent in 2011.
BGK will also establish an investment vehicle capitalised with revenue from the sale of state-owned assets. The vehicle would begin operating in 2013 and would replace private investors on some projects.
The whole programme of BGK's investments and credits dubbed "Polish Investments" will amount to 40 billion zlotys (7.8 billion pounds) by 2015, being part of a 700-800 billion zlotys $222-$253 bln) plan outlined by Prime Minister Donald Tusk on Friday.
The role of BGK, effectively that of a development bank, is similar to Germany's state-owned KfW that helped rebuild the country after World War Two, Rostowski said.
"We want to raise the capital of BGK, gradually, depending on the investment needs and start extending credit for the best prepared projects in the first quarter of 2013," Treasury Minister Mikolaj Budzanowski said at the same conference.
"We want large energy projects to be realised in 2013 through this mechanism," Budzanowski also said, adding BGK's new lending should start in the first quarter.
Poland is eyeing 60 billion zlotys of energy sector investments by 2020, including the construction some of the country's largest power projects like the 1,075 megawatt coal-fuelled unit in Kozienice.
Oil refiner Lotos could get financing for a 1 billion zlotys project to develop a deposit in the Baltic Sea via the new lending programme, Budzanowski also said, adding that the ministry is currently not looking for a strategic investor for the company.
Budzanowski said the value of the privatisation shares that BGK is to receive and then sell on the market to obtain capital will amount to more than 10 billion zlotys.
Deputy Treasury Minister Pawel Tamborski said proceeds from the sale of shares of utility Energa could be the first to strengthen BGK's capital in 2013.
Budzanowski also said BGK will receive shares mainly of those companies, where the state has majority stakes, adding that the ministry does not plan to reduce its holdings at refiner PKN Orlen , utility Tauron or copper miner KGHM .
"In many other companies our stake is larger than 50-60 percent and this is where this privatisation potential is," Budzanowski said.
The state holds 62 percent of Poland's top utility PGE, 56 percent of coal miner JSW and 72 percent of gas monopoly PGNiG.
Any transfer of shares to BGK and their subsequent sale in 2013, would be on top of the planned up to 12 billion zlotys privatisation and dividend revenue assumed to go to the 2013 state budget. From 2014 BGK is set to receive all privatisation and dividend revenue.
(Writing by Marcin Goettig; editing by Keiron Henderson)