Govt official sees €15-20bn IMF agreement

Hungary could reach an agreement with the International Monetary Fund (IMF) on €15bn-20bn in financial assistance for 3-4 years, state secretary of the Prime Minister’s Office Mihaly Varga said in an interview with internet portal origo.hu on Tuesday.

"Given the fact we only want to use it in a situation of extreme necessity, the money will not raise state debt and a bigger amount could be a possibility. Calculating with our maturing state debt, a three- or four-year agreement for €15bn-20bn is conceivable," Mr Varga told origo.hu.

Mr Varga said an agreement on the financial assistance could be reached by the end of January, after a month and a half of talks between the negotiating parties.

Asked how much of a fiscal adjustment would be required in 2012 because of the worse outlook for GDP growth and the weaker forint, Mr Varga said he was certain that "further steps" would be necessary to meet the deficit target.

He said analysts’ estimates that put the scale of the adjustment between HUF 100bn and 200bn were "not far off from the calculations".

Asked whether further measures would affect the expenditure or revenue sides of the budget, and to what degree, Mr Varga said there were "very few possibilities" on the expenditure side because of public sector layoffs made in 2011 and revenue-side steps were "dangerous" for growth. He said a "mix" had to be worked out that would affect both the revenue and expenditure sides, although the proportion would "depend on calculations being made right now".