November 28, 2015 / 12:18 PM / 4 years ago

Polish finance minister eyes foreign currency debt cut - report

WARSAW, Nov 28 (Reuters) - Poland should cut its borrowing in foreign currencies to below the current one-third or so of all state debt to shield itself against exchange rate fluctuations, newly appointed Finance Minister Pawal Szalamacha told a newspaper.

“Poland has a limited impact on the activity on international currency markets,” Szalamacha said in an interview run by daily Gazeta Polska Codziennie on Saturday.

“The only thing we can do is to carry on with activities aimed at decreasing the share of debt issued in foreign currencies, in euros or dollars, so that it comes down to below 30 percent of overall debt and continues on a downward trend.”

Szalamacha also said there was still room for a small interest rate cut by the central bank, perhaps early in 2016, as there are no signals that deflation is about to end.

The central bank, which is independent of the government, ended its easing cycle in March, when it cut the main rate to a new all-time low of 1.50 percent.

The bank has kept rates unchanged since then, even though consumer prices have been falling for over a year, posting a 0.7 percent year-on-year drop in October.

“For several months we have seen persistent deflation. What is it that should have an impact on reverting this trend? Indicators are not pointing to that, for example the price of oil is not following an upward trend,” Szalamacha said.

“It seems that there is space for a small cut in interest rates. Perhaps this will have to wait until January of February 2016.”

While the bank is independent, parliament, now controlled by the conservative Law and Justice (PiS) party, will together with its ally, President Andrzej Duda, have appointed eight of the 10 central bank policymakers by mid-February 2016.

Szalamacha’s comments echo analysts’ expectations, who see the central bank cutting its benchmark interest rate to a record low 1.25 percent in the first quarter of next year. (Reporting by Wiktor Szary; Editing by Hugh Lawson)

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