Barcza, who took office on February 1, said diversification of the ownership and FX structure of debt is a way to reduce risks and should continue. The considerations of government, central bank policy and those of the government debt manager should be harmonised, the new CEO said when asked whether ÁKK had a specific schedule for the further reduction of the share of FX debt.

The FX share of state debt fell to 36%-38% by the end of 2014 from 44% in 2011, including loans from the IMF and the EU. Barcza said the state of Hungary and the central bank together had net FX-denominated foreign assets of €3.6 bln at the end of last year while they had net FX debt of €6.5 bln at the end of 2010, noting a sharp drop of both the country’s gross and net foreign FX-denominated debt during the period.

These developments reflect both reduced FX issues and net transfers from the European Union that raise international reserves, he added. his year’s financing plan includes no FX issues, with the exception of “residency bonds”, to the tune of HUF 160 bln, the ÁKK CEO said. He said the issues of the securities, which accelerate applications for permanent residency in Hungary by foreign nationals, are among ways to diversify the ownership structure of state debt. Retail demand for government securities has risen, Barcza said.

Retail investors’ share of state debt rose to 9.5% by Q3 2014 from just 2% in 2010, which also increases diversity, he added. Barcza termed it strange that Hungary’s credit rating had not changed in five years despite a more stable financial sector, dropping FX exposure and falling interest expenditures because of lower rates and debt ratios.

The state debt-to-GDP ratio could drop 1.5%-2% a year if the fiscal deficit is 2.5% of GDP and nominal GDP rises more than 4%, getting closer to the 50% threshold set in Hungary’s constitution, he said.