NBP Is the Guardian of Poland’s Macroeconomic Stability and Supports Ukraine

The ancient Romans used to say si vis pacem, para bellum, in other words “If you want peace, prepare for war”. However, this Latin adage conveys not only the basic doctrine of the art of war, but also the principle that guides Narodowy Bank Polski when taking its anti-crisis measures. Because we never know exactly when and in what form another crisis will materialize, we - at Narodowy Bank Polski - are constantly bracing ourselves for another economic upheaval, safeguarding a solid foundation for the economy and a strong financial position of the central bank. With this attitude we have managed to join the elite club of economies which have not only weathered the global financial crisis of 2007-2012 and the COVID-19 pandemic of 2020-2021 relatively well, but also capitalized on the episodes to increase their potential in a creative manner.

The Russian aggression produced harmful consequences for the whole world economy, resulting in higher inflation, a food crisis, disruptions to trade and supply chains, but also to financial flows, and increased uncertainty. European countries, even those that in geographical terms are far away from the conflict, were affected by shortages of oil and gas supplies, increased food prices or additional expenditure on military and humanitarian aid to Ukraine. However, the effects of the war are undeniably more palpable in Central Europe and Poland in particular, via closer linkages and because of the huge influx of refugees.

Extraordinary Scale of Extraordinary Challenges

According to the United Nations High Commissioner for Refugees (UNHCR), almost 8 million people had been recorded across Europe as refugees by 10 January 2023. Nearly 8.9 million Ukrainians have entered Poland since the outbreak of the war and over 1.5 million of them still remain enrolled in various governmental refugee protection programmes.

The largest conflict on European soil since World War II generated numerous and unprecedented political, economic and social challenges for Poland as a frontline country. Nevertheless, the response of Poland and its central bank (Narodowy Bank Polski, NBP), headed by Prof. Adam Glapiński, was massive and immediate. As the National Bank of Ukraine (NBU) had been the key beneficiary of NBP’s peer-to-peer programmes in the past, the urge to act quickly in the face of the dramatic turn of events and the strong personal commitment of Prof. Glapiński himself made it natural for NBP to be among the first to give a helping hand.

USD 1 Billion Swap Line for the NBU

Within the first hours of the war, the NBP Management Board officially declared its full solidarity with the people of Ukraine and the Ukrainian central bank, pledging to provide all the necessary support. On the same day, NBP turned words into actions and decided to renew the foreign currency (FX) swap line with the NBU for the US dollar and Ukrainian hryvnia (USD/UAH) currency pair. Such an arrangement between two central banks allows the bank in need to keep currency available, which stabilizes the market when it comes under stress. Eventually the swap line limit was set at USD 1 billion, aiming at strengthening the financial system stability in the region.

All the help and support provided by Narodowy Bank Polski is hard to overestimate. The funds received under the FX swap agreement will increase our international reserves and help us to maintain the macro-financial stability of Ukraine. We are grateful to our colleagues for their cooperation and the vote of confidence, said National Bank of Ukraine Deputy Governor Yuriy Heletiy (22 March 2022, www.bank.gov.ua).

Exchange of Hryvnia at a Favourable Exchange Rate

Another proof of NBP’s concern for the stability of the Polish and Ukrainian financial markets under those extraordinary circumstances, and at the same time true help for refugees in the on-going humanitarian crisis, was the bilateral agreement between the central banks of Poland and Ukraine, which allowed Ukrainian refugees staying in Poland to exchange Ukrainian hryvnia for Polish zloty. Due to the cooperation between NBP and one of Polish commercial banks offering its network of 100 regional branches, from 25 March to 9 September 2022 Ukrainian citizens were able to exchange UAH cash into PLN. All operational costs were covered by both participating Polish institutions. This unprecedented operation set an example for other European countries.

Many representatives of the brave Ukrainian nation fleeing the criminal military aggression have come to Poland. Often they only have hryvnias with them (taken in haste), which so far they have been unable to exchange for zloty. Since the first day of the war, NBP has been working with our friends from the National Bank of Ukraine to solve this problem. It is important that the heroic defenders of Ukraine know that we are taking care of their families. I am very pleased with the regulation of this very important issue for the refugees, said Prof. Adam Glapiński, Governor of Narodowy Bank Polski (22 March 2022, www.nbp.pl).

Besides initiating unique projects to support the financial markets, reduce foreign exchange market disruptions and facilitate cash conversion for the Ukrainian refugees, Narodowy Bank Polski provided the NBU with substantial support to secure its business continuity and the fulfilment of its statutory tasks, knowing that Ukraine’s financial system needs the central bank to perform its critical functions without interruption.

Support for Ukraine’s Interests on the International Arena

But NBP’s support for the NBU was not only in kind (armoured vehicles, IT equipment and humanitarian aid) or macro-financial, as mentioned before. The Polish central bank has promoted Ukraine’s interests at the international level and has worked hard to introduce the subject of backing Ukraine to the agenda of international institutions. Narodowy Bank Polski has fostered Ukraine’s cooperation with the International Monetary Fund (IMF), in particular with regard to launching - as soon as possible - a fully-fledged programme of support for the country. The new upper-credit tranche programme with the IMF can become an important element of financial support for Ukraine and contribute to the consolidation of efforts by other international partners. NBP firmly stands with Ukraine in this endeavour.

NBP Gives a Helping Hand to the Ukrainian Central Bank

Poland has witnessed from a close distance not only the strength and courage of all fighting Ukrainians, but also the extraordinary resilience of its institutions faced with a crisis of an unprecedented magnitude. This applies, among others, to the National Bank of Ukraine. Due to its determination and wise decisions of its management, Ukraine has not fallen into a banking crisis, the country’s financial system has not collapsed and the people have had uninterrupted access to bank accounts and cash. This resilience bodes well for the future and constitutes a solid base for Ukraine’s post-war reconstruction, as well as the country’s integration with the EU. While standing ready to further assist the NBU as long as the war continues, NBP is already looking forward to cooperating with it as a real partner and ally in shaping a future European economic order and in promoting financial stability in this part of the continent.