Poland - Development Policy Loan 2 : P130459 - Implementation Status Results Report : Sequence 01

 The World Bank Report No: ISR11445 Implementation Status & Results Poland Development Policy Loan 2 (P130459) Public Disclosure Copy Project Name: Development Policy Loan 2 (P130459) Program Stage: Implementation Seq.No: 1 Status: ARCHIVED Archive Date: 03-Sep-2013 Country: Poland Approval FY: 2013 Product Line: IBRD/IDA Region: EUROPE AND CENTRAL ASIA Lending Instrument: Development Policy Lending Implementing Agency(ies): Key Dates Board Approval Date 18-Jun-2013 Original Closing Date 30-Jun-2014 Planned Mid Term Review Date Last Archived ISR Date Effectiveness Date 11-Jul-2013 Revised Closing Date 30-Jun-2014 Actual Mid Term Review Date Program Development Objectives Program Development Objective (from Program Document) The programmatic DPL is structured around three pillars with the following development objectives: (i) consolidating public finances to ensure a steady decline of the fiscal deficit to stabilize and over the medium term reduce public debt; (ii) strengthening fiscal institutions to ingrain a prudent fiscal stance (including at the sub-national level) over the medium term; and (iii) advancing long-term fiscal reforms to secure the sustainability of social spending in view of Poland’s demographic challenge. These policies aim to enhance Poland’s economic resilience in the face of adverse times and to protect fiscal space for key growth-enhancing investments. Has the Program Development Objective been changed since Board Approval of the Program? Yes No Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Overall Implementation Progress (IP) Satisfactory Implementation Status Overview Public Disclosure Copy While the second (in the series of two) DPLs became only recently effective, the DPL program already shows a notable progress in achieving its results indicators: 1. By the end of 2013, the public debt-to-GDP ratio (national definition) is stabilized at or below the 2011 level - Progress to date (mid-August 2013) includes: The fiscally responsible budget for 2012 directly contributed to a decrease in the general government deficit from close to 8 percent of GDP in 2010 to 3.9 percent of GDP in 2012. The reduction in the fiscal deficit in 2012 has been instrumental for putting public debt on a downward path. The public debt to GDP ratio (according to the national methodology) was 52.7 percent in 2012 vs. 53.4 percent in 2011. Significant deterioration in Poland's macroeconomic situation, driven by the prolonged recession in the Euro Area, put strains on the government fiscal position in 2013. In the light of poor revenue collection in the first half of 2013, which resulted in an estimated revenue shortfall of PLN 24bn as compared to the annual plan, the Government was forced to amend the budget in mid-August 2013. The revenue shortfall (PLN 24 billion) will be compensated by higher fiscal deficit (by PLN 16 billion - from PLN 35.6 to PLN 51.5 billion) and spending cuts (of close to PLN 8 billion). Higher fiscal deficit may lead to an increase in public-debt to GDP ratio in 2013, nevertheless debt is expected to stay below 55 percent of GDP. Page 1 of 4  The World Bank Report No: ISR11445 2. By the end of 2013, the local governments’ debt-to-GDP ratio (ESA’95 definition) is stabilized at or below the 2011 level - Progress to date (mid-July 2013) includes: In 2012, the local governments debt-to-GDP ratio decreased to 4.2 percent of GDP (below the 2011 level). In 2013, it is expected to remain below the 2011 level, too, and stabilize in the medium term. Public Disclosure Copy 3. By the end of 2013, the social security funds’ deficit-to-GDP ratio (ESA’95 definition) is reduced compared to 2010 - Progress to date (mid-July 2013) includes: The social security funds’ deficit turned into surplus of 0.2 percent of GDP in 2012. 4. Hospital arrears are reduced by 8 percent by end-2013 compared to end-2011 - Progress to date (mid-July 2013) includes: While the Law on Therapeutic Activities has not yet delivered a reduction in hospital arrears, it has contributed to the restructuring and corporatization of the hospital sector. Because it increases the financial accountability of hospital owners, the process will ultimately lead to an improvement of the financial sustainability of the hospital sector and also result in a reduction in hospital arrears. As of March 2013, 26 hospitals have decided to change their legal status. Another 22 hospitals are getting ready to change their legal form. So far, no hospital closure has been reported. However, it is too early to assess the nominal impact of this reform on hospital arrears. 5. The last-resort minimum income benefit for a “typical