Gov't moves to make zloty harder through law changes
"It will liberalize currency exchanges, like import and export transactions," said Krzysztof Rybinski, chief economist with ING Barings. "What does it mean for Kowalski (the man in the street)? Well, if he runs an export company, he will be able to invoice all transactions in zlotys."
In the long term, a Pole going to Paris will be able to travel with just zlotys, which will be convertible throughout Europe, Rybinski added. How soon the zloty will be accepted in other countries also depends on demand in a particular location.
"In practice, it will depend on foreign banks," said Waldemar Cichowlaz, a dealer with Credit Lyonnais in Warsaw. "Probably at the beginning, the spread on the Polish zloty (the difference between buy and sell rates) will be very wide and will narrow in time."
The new law will also increase the limit on the amount of hard currency a foreigner can leave Poland with. Currently, foreigners can exit the country with any amount of zlotys, but can only leave with ECU 2,000 in hard currency. Poles, on the other hand, can leave with up to ECU 5,000.
"The new currency law sets the same limits both for Poles and expats," said Andrzej Golebiewski, director of the currency policy department at the Finance Ministry and a co-author of the new law. "It will be ECU 5,000."
The limitations, however, will apply to zlotys as well once the currency becomes fully convertible, he added.
But liberalization of the zloty for investment purposes will not take effect for some time in regard to short-term capital inflows. For example, foreign investors will still need National Bank of Poland (NBP) approval to open zloty-denominated deposit accounts that have a maturity of less than three months and are for more than zl. 1 million ($285,000).
Under the government's latest proposal, the Finance Minister will also retain the right to intervene when the zloty's stability is threatened. This could mean forcing investors to open interest-free deposits in chosen banks in the event of attacks on the currency.
"The restrictions show that there is still concern about the zloty's stability," said Credit Lyonnais' Cichowlaz. "It is still too early for further measures since the Polish money market is too shallow."
In the long term, a Pole going to Paris will be able to travel with just zlotys, which will be convertible throughout Europe, Rybinski added. How soon the zloty will be accepted in other countries also depends on demand in a particular location.
"In practice, it will depend on foreign banks," said Waldemar Cichowlaz, a dealer with Credit Lyonnais in Warsaw. "Probably at the beginning, the spread on the Polish zloty (the difference between buy and sell rates) will be very wide and will narrow in time."
The new law will also increase the limit on the amount of hard currency a foreigner can leave Poland with. Currently, foreigners can exit the country with any amount of zlotys, but can only leave with ECU 2,000 in hard currency. Poles, on the other hand, can leave with up to ECU 5,000.
"The new currency law sets the same limits both for Poles and expats," said Andrzej Golebiewski, director of the currency policy department at the Finance Ministry and a co-author of the new law. "It will be ECU 5,000."
The limitations, however, will apply to zlotys as well once the currency becomes fully convertible, he added.
But liberalization of the zloty for investment purposes will not take effect for some time in regard to short-term capital inflows. For example, foreign investors will still need National Bank of Poland (NBP) approval to open zloty-denominated deposit accounts that have a maturity of less than three months and are for more than zl. 1 million ($285,000).
Under the government's latest proposal, the Finance Minister will also retain the right to intervene when the zloty's stability is threatened. This could mean forcing investors to open interest-free deposits in chosen banks in the event of attacks on the currency.
"The restrictions show that there is still concern about the zloty's stability," said Credit Lyonnais' Cichowlaz. "It is still too early for further measures since the Polish money market is too shallow."
