June 2, 2016 / 4:20 PM / in 2 years

Poland wants KfW-like state fund to spur growth with easier financing

WARSAW (Reuters) - Polish state fund PFR sees German peer KfW [KFW.UL] as a role model for how to coordinate state financial support and plans bond issues in 2017 to finance its needs, its chief executive said at the Reuters Eastern Europe Investment Summit.

Just as KfW offers cheap credit to back political goals, PFR plans to harness Poland’s state institutions - including state bank BGK - to help economic growth via easier access to financing.

PFR has 50 billion zlotys ($13 billion) of assets at hand, a far cry from KfW’s almost 500 billion euros ($560 billion), or 13 percent of Germany’s gross domestic product (GDP).

“There are over 150 such banks around the globe, almost every country has some form of a development bank,” PFR chief Pawel Borys, former managing director of state-controlled lender PKO PKO.WA, told the summit, held at the Reuters office in Warsaw.

“The mission is to invest in social and economic growth by filling the holes in the market economy not filled by the private sector. Financing innovation, venture capital or research and development are high-risk investments, which the private sector does not want to finance at early stages.”

PFR sees its role as an intermediary between public resources and small and medium-sized companies, as well as local governments in need of capital. It could provide half of needed money, with the other half coming from private investors, Borys said.

“In some way, the European Union is now playing a role of a development bank, with funds set for a wide range of projects,” Borys said. “PFR would take the EU’s role as investment partner as EU funds start to wind down by the end of the decade.”

“This sets the time frame for PFR to become known on international markets, to build relations with investors, maybe via bond issues on various markets,” Borys said. “So that long-term (...) it could fill the investment gap after current EU financing ends.”

According to Borys, KfW secures around 80 percent of its needs through foreign bond issues, making use of Germany’s triple-A rating. PFR wants to follow suit next year.

“500 million-1 billion euros is a good potential benchmark for first such issues,” Borys said. “Globally, such issues are highly popular. Banks and bond funds are very keen buyers.”

“PFR is to be the flywheel, mobilizing private resources, so that every invested zloty meant 2-3 zlotys for the country’s financial system. Its role is not to book maximum returns, but to be a healthy institution supporting economic growth.”

Follow Reuters Summits on Twitter @Reuters_Summits

Additional reporting by Pawel Florkiewicz; Writing by Adrian Krajewski; editing by Adrian Croft

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