Fiscal Council greenlights final vote on 2019 budget

MNB

Hungaryʼs Fiscal Council on Tuesday gave its go-ahead for Parliament to take a final vote on the 2019 budget bill after MPs passed amendments to the original bill on Monday. The body took the opinion that the bill is in conformity with the debt rule, requiring a reduction of state debt, even after amendments.

At the same time, the Council noted that the government must maintain discipline in 2019, and should offset spending rises or revenue drops caused by an eventual change in macroeconomic conditions, making use of the increased room for maneuver of recent years, national news agency MTI reported.

The amendments approved on Monday raised both revenues and expenditures by HUF 267.5 million, leaving both the cash flow-based deficit of the central subsystem and the EU-conform deficit unchanged, the Council said.

The amendments raised expenditure by a gross HUF 30.3 billion; however, this was offset partly by cuts in expenditure in other fields and partly by raising the revenue targets from VAT and excise duty. The amendments left the various reserves in the budget unchanged, including the Country Protection Fund set aside for unseen risk to the deficit, the Council noted.   

Taking into account that the drop in the debt ratio exceeds the legal requirement, reserves against risks are sufficient, the Council said.    The ratio of state debt to GDP is to drop from 72.9% to 70.3% under the finalized bill, similar to the original one, and is realistic and well based, the Council maintained.

The budget will conform to the debt rule, requiring a reduction of state debt even if GDP grows less than assumed, the Council said.    The Council noted that changes in the exchange rate do not affect the conformity of the bill to the Hungarian debt rule as the latter requires FX-denominated debt to be calculated at the same, fixed exchange rate.

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