This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
The idea proposed by Adam Glapiński, president of the National Bank of Poland (NBP), to fund military spending by selling part of the bank’s gold reserves may seem appealing at first glance. A closer look, however, raises serious doubts. These concern not only the scale and feasibility of an alternative to the EU’s SAFE mechanism, but also its consistency with the NBP’s existing policy and the intentions driving it.
Mr. Glapiński unveiled the details of a mechanism to finance armaments from NBP profits, dubbed “SAFE 0%.” Public discussion so far has assumed that the scheme would essentially involve selling purchased gold with a plan to repurchase it. The NBP holds 570 tons of gold, of which 447 tons were acquired between 2022 and 2025.
Interactive chart With rising gold prices, the value of these reserves has increased substantially, generating unrealized profits of PLN 197 billion (around EUR 42 billion). The accounting gains from this operation would then be allocated to military spending.
According to Mr. Glapiński, however, the mechanism would operate differently, relying on the sale of gold with the intention of repurchasing it in, say, two or three years. This means the scheme would generate actual realized profits from gold, rather than merely a paper accounting exercise. At the same time, such a move would not deplete Poland’s foreign exchange reserves, but would alter their composition – converting gold into dollars or euros.
Under the draft legislation submitted by the president, the profits generated in this way would be channeled into a special fund – the Polish Defense Investment Fund – established within BGK, the state development bank. The fund’s governance structure would give presidential representatives veto power over its decisions.
Mr. Glapiński also noted that the operation is unlikely to take place in practice, as the government has shown no interest in the proposal. Nevertheless, working groups from the NBP, the Ministry of Finance, and the Ministry of Defense are expected to be set up to explore potential central bank support for military spending in the future.
Yes, but...
At first glance, Adam Glapiński’s proposal may seem intriguing. A closer look, however, reveals at least four points of concern.
The first “but” relates to the fact that the proposal contradicts a goal adopted by the NBP in January. At that time, the NBP board decided to increase the bank’s gold holdings to 700 tons. Mr. Glapiński himself reiterated this target at a press conference while explaining the defense financing mechanism. How, then, is selling gold meant to contribute to a plan to expand reserves?
The second “but” concerns the scale of funds that such an operation could realistically generate. Gold currently trades above USD 5,000 per ounce, but history shows its price is highly volatile. There is no guarantee it will remain at these levels. To secure, for example, PLN 50 billion (EUR 10.5 billion), roughly 140 tons of gold would need to be sold in the near term. Moreover, any profits realized this year could only be disbursed by the NBP in the middle of next year.
The third “but” involves the dependence of the operation on government approval. Mr. Glapiński has repeatedly emphasized that decisions regarding foreign exchange reserves fall exclusively within the NBP’s remit, and any such operation must comply with existing regulations. So why can it not proceed without government consent, and why would the profits not simply be transferred to the state budget through the standard channels?
One can assume the NBP’s good intentions – that the funds would indeed be used for defense spending rather than other purposes. This may explain why Mr. Glapiński implicitly suggested the creation of a special fund. Yet does a central bank have the authority to set such an ultimatum for the government? The NBP’s primary task is to safeguard price stability, and, where possible, to support the government’s economic policy. If rising gold values provide an opportunity to assist the state, why should the central bank impose additional conditions?
This is not an alternative to SAFE
The concerns outlined above mean that, first and foremost, this program cannot be regarded as a substitute for the EU’s SAFE loan. Chiefly, there is no guarantee of how much funding the central bank could actually channel to defense spending. It is unlikely that the sum would approach EUR 44 billion – the amount Poland is set to borrow under SAFE. Achieving that would require either selling nearly all of the NBP’s current gold holdings or relying on a further dramatic increase in gold prices.
Moreover, the government would need to trust that the NBP board would consistently sell gold over several years, generating profits in a predictable manner. Defense financing would thus hinge on the assumption that the central bank does not change its policy.
Unfortunately, the proposal appears to carry political overtones. Mr. Glapiński has repeatedly stated that the NBP purchased gold not for resale. According to NBP materials, gold plays a special role in foreign exchange reserves. As recently as January, the bank set a target of 700 tons of gold, and previously a 30 percent share of gold in reserves. Gold prices have been rising for two years, and in January they were not materially different from today; unrealized profits were roughly the same. So what explains this sudden change in Mr. Glapiński’s stance? No explanation comes to mind other than a desire to assist the president in proposing alternatives to SAFE.
Key Takeaways
- The mechanism cannot realistically replace the EU’s SAFE defense financing instrument, which could provide Poland with far greater resources. At the same time, there are suspicions that the proposal is politically motivated, representing an attempt to create an alternative to the EU-backed solution.
- NBP President Adam Glapiński has proposed a mechanism to finance defense spending through the sale and subsequent repurchase of part of the National Bank of Poland’s gold reserves. Thanks to rising gold prices, the central bank has accumulated around PLN 197 billion (EUR 42 billion) in unrealized gains, which could, following the sale of part of the holdings, be allocated to defense via a special fund within BGK, the state development bank.
- The proposal raises several serious concerns. Selling gold conflicts with the NBP’s earlier strategy of increasing reserves to 700 tons, and the potential scale of funds is uncertain, dependent on volatile gold prices.