Govt may sell part of MOL stake if needed, says Varga

History

Hungary's government may sell part of a 21.2% stake in Hungarian oil and gas group MOL it acquired earlier this year, state secretary of the Prime Minister's Office Mihály Varga said on a radio show on Friday.

"The thought that the government could either sell a portion of this stake or begin to gradually sell it must not be excluded, since it is impossible for us to foresee what is going to take place with regard to foreign-currency financing or on the foreign-currency market," Varga said.

Varga said he could imagine a situation in which safe financing at the beginning of 2012 required the sale part of the state share packet.

At the same time, he stressed it was important for the government to have a view on the country's most strategically important company.

Hungary's government purchased the 21.2% stake in MOL from Russian oil and gas company Surgutneftegas for €1.88 billion in a transaction closed on July 6.

China's readiness to buy Hungarian government securities offers security for Hungary even if there is no need for such purchases at present, Varga said.

The strengthening of the Swiss franc is a risk to growth, Varga added.

"The current [Swiss] franc rate, if proves steady, could cut Hungary's growth potential by as much as 0.3-0.5 percentage points", Varga, who was finance minister in the early 2000s under the previous Fidesz government, said.

The government has no room to encourage demand as it should keep the ratio of government debt to GDP under 80%, the state secretary said, adding that he expects another 2-3 percentage-point reduction in the debt ratio in the autumn.

Hungary's state debt ratio was reduced from to 77% from 81% of GDP earlier in the summer through the withdrawal of government securities in the assets portfolio private pension funds transferred on former members to the state in June.

Varga said it was vital interest to keep the general government deficit below 3%.

Excluding one-off items, such as the private pension fund assets transfer or planned takeover of debt of state-owned transport companies, the 2011 ESA deficit target is 2.94% of GDP.

A deterioration of the events in Greece would compel the government to re-calculate the country's convergence plan, and likely to review the New Széchenyi development plan or the structural reform plan, Varga said in the interview.

It was important to complete the foreign exchange financing necessary for the full year in the first half, he said, noting that in the spring the government even considered raising part of next year's foreign exchange financing needs as early as this autumn.

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