Hungary could seek IMF package similar to Romania's

Analysis

Hungary's government could be seeking a credit package from the International Monetary Fund and the European Union that is similar to one Romania got in March 2011, daily Népszabadság said on Monday. Hungary started negotiations with the IMF/EU on the precautionary financial assistance late in July.

Sources with knowledge of the negotiations told the paper that the European Commission is drawing up an agreement of a precautionary nature, while the IMF is continuing to offer a precautionary Stand-By Arrangement.

The IMF said earlier it would negotiate with Hungary on a Stand-By Arrangement (SBA) but acknowledged that the country would treat the credit as precautionary.

The paper noted that Romania got a 24-month €3.5 billion precautionary SBA from the IMF late in March 2011. The country's authorities said they did not plan to draw under the arrangement.

"SBAs may be provided on a precautionary basis -- where countries choose not to draw upon approved amounts but retain the option to do so if conditions deteriorate," according to the IMF's descriptions of its existing credit arrangements.

SBAs address short-term balance of payment problems and disbursements are conditional on achieving targets designed to address these problems, the SBA description notes.

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