Forint set to firm, new FX bond issuance doubtful, Varga says

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The forint is set to firm and Hungary may finance itself with increased forint debt issuance in the rest of 2013 rather than selling foreign currency bonds again, Economy Minister Mihály Varga said in an interview with Reuters news agency. Hungary raised $3.25 billion from the international market in February in a sale that can help the country fund itself until election in the spring of 2014 without help from the International Monetary Fund. "I don't rule out (a new foreign currency bond issue), but there are more arguments now not to resort to that," Varga said in an interview on Friday, adding, "While there is room for increasing forint (debt) issuance." Varga took office in March to succeed György Matolcsy, the architect of unorthodox policy measures that often confounded investors. Varga said he meets with Matolcsy, who became central bank governor, regularly to discuss the economy. Worries that Matolcsy would launch economic stimulus measures that could upset markets caused wobbles in the forint over the past months, but the final programme announced last month was met with relief as it was less drastic than some had feared. Varga restated his preference for the forint to rise to 275-285 to the euro, a range he first indicated in January before becoming economy minister, from around 300 to the single European currency now. Varga said Hungary's bank tax, the highest in Europe, would stay in the coming years, but the government was in talks with banks on measures to reduce their tax burden and help the economy recover from last year's recession. One option being mulled was to reduce tax if banks lent more relative to last year, he said. The government was also considering a proposal from the central bank to merge the independent financial-market watchdog PSzÁF into the bank in a move which some banking sources said could put too much power into Matolcsy's hands.

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