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Hungary gen govt deficit reaches 130.4% of modified full-year target by August

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Hungary's cash flow-based general government deficit, excluding local councils, reached HUF 1,544.6 billion in January-August, or 130.4% of the modified full-year target, the National Economy Ministry said in a preliminary report on Wednesday.

In spite of the pro-rata overshoot, the ministry said it would still meet the modified target for the full year.

The ministry said that it intends to omit the effect of the state's purchase of a 21.2% stake in Hungarian oil and gas company MOL for €1.88 billion in a deal announced in May from annual comparisons because it classifies it as a one-off item.

Hungary's Parliament recently modified the full-year deficit target to HUF 1,184.2 billion from HUF 687.4 billion, because of the purchase of the MOL stake in a deal announced in May.

Adjusted for the pro rata effect of HUF 528.8 billion in revenue the budget is receiving from private pension fund assets transferred to the state's Pension Reform and Debt Reduction Fund and revenue from extraordinary sectoral taxes, as well as excluding the purchase of the MOL stake, the deficit would have reached HUF 875.1 billion at the end of August, the ministry said.

The ministry modified its projection for the third quarter of the year. It expects the deficit will reach HUF 1,608.7 billion, or 135.8% of the full-year target by the end of September before finishing the year at 100.0% of the full-year target. It projects the general government will have a deficit of HUF 574.1 billion in the third quarter and a surplus of HUF 424.5 billion in the fourth quarter.

In a breakdown of the general government, the ministry said the central budget ran a HUF 1,384.3 billion deficit in January-August. The gap for the social insurance funds reached HUF 247.3 billion, but separate state funds had a surplus of HUF 87.0 billion.

In August alone, the general government had a HUF 50.1 billion deficit. The central budget deficit came to HUF 16.8 billion and the social insurance funds were HUF 34.9 billion in the red, but separate state funds had a HUF 1.6 billion surplus.

The deficit targets are calculated excluding the effect of the transfer of private pension fund assets of former fund members, to be accounted as revenue under ESA, and without expenditures of the takeover of the debt of transport companies MAV and BKV and the planned buyout of public private partnerships (PPPs).

Under a government decree published on August 5, the state will take over up to HUF 300 billion of debt from state-owned railway company MAV and up to HUF 78 billion of debt from the capital's local transport company BKV. In the same decree, the government limits spending to end public-private partnerships (PPPs) to HUF 200 billion.

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