Fellegi: Engagement on all issues affects macro policy condition for IMF talks

History

Hungary’s talks with the International Monetary Fund on financial assistance depend on the government’s commitment to engaging on all policy issues affecting macroeconomic policy, IMF managing director Christine Lagarde said in a statement late Thursday, after talks with Hungarian minister without portfolio Tamas Fellegi.

"I indicated that, before the Fund can determine when and whether to start negotiations for a Stand-By Arrangement, it will need to see tangible steps that show the authorities’ strong commitment to engage on all the policy issues that are relevant to macroeconomic stability," Ms Lagarde said.

Ms Lagarde’s statement suggested the IMF wants a Stand-By Arrangement for Hungary, a construction to which more conditions are attached than other credit lines.

Mr Fellegi also said in a statement sent to MTI after the talks that a Stand-By Arrangement was probable.

"At present, we are at the point that we will most probably discuss a Stand-By Arrangement, of which important elements will be conditionality and review," he said. "The specific form and amount will depend on the negotiations," he added.

Hungary is seeking financial assistance from the IMF and the European Union as a precautionary measure that will allow it to continue to finance its debt on the market. Mr Fellegi is leading the Hungarian delegation at the talks on the credit.

Mr Fellegi affirmed the government’s commitment to improving investor confidence in Hungary.

"We understand and agree entirely with the IMF experts that Hungary must follow a path that strengthens the confidence of markets as well as the Hungarian economy and Hungarian institutions, that we must lay the foundation for sustainable growth," he said.

An official Hungarian statement said Mr Fellegi confirmed at the talks that the government was committed to achieving these goals in the framework of a programme approved with a joint agreement.

Talks with the IMF and EU derailed in December when Hungary’s Parliament approved some contentious pieces of legislation, including the new Central Bank Act which raised concerns in Brussels and Frankfurt over the independence of the National Bank of Hungary (NBH), a key EU principle.

"Support of the European authorities and institutions would also be critical for successful discussions of a new program," Ms Lagarde said.

Mr Fellegi said the independence of the NBH was brought up at all levels during the talks with the IMF, which started on Monday, but the country’s new constitution was not.

He said he would hold talks with European partners in the coming week to reconcile over disputes and to reach an agreement on the start of and schedule for talks with the IMF and the EU. He added that the official negotiations should be started as soon as possible.

Mr Fellegi’s delegation during his talks with Ms Lagarde included National Bank of Hungary deputy governor Ferenc Karvalits, National Economy Ministry state secretary Gyula Pleschinger and Hungary’s ambassador to the US Gyorgy Szapary.

Ms Lagarde called the meeting with Mr Fellegi "useful", saying the discussion was "about the latest economic developments in Hungary and about how best the IMF can assist the country in addressing the current economic situation".

Mr Fellegi is slated to meet with European Central Bank governor Mario Draghi on Monday and Tuesday of next week. He will also meet with German finance minister Wolfgang Schauble, top politicians in the government and German bank heads. On Thursday, he is set to meet Austrian central bank governor Ewald Nowotny and Austrian finance minister Maria Fekter in Vienna, and he will travel to Brussels for a meeting with European Commission vice president Olli Rehn on Friday.

Asked at a press briefing about the meeting between Mr Fellegi and Ms Lagarde, Amadeu Altafaj Tardio, the spokesman for European Commission Vice President Olli Rehn, referred to the IMF statement, saying it was "a statement that we fully share". "We are in close contact with our IMF partners," he added.

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