Government participation in a plan to cut the National Bank of Hungary‘s (MNB) stock of two-week bills, its main tool for soaking up liquidity, is still unclear; however, the MNB will still implement the cut, using its own tools, if necessary, MNB executive director Márton Nagy told journalists on Tuesday. The MNB said earlier it expects to arrive to the planned reduction of the two-week bill stock with a combination of its own tools, offering FX swaps to banks, and of government measures. The government could contribute through repaying short-term foreign currency debt, or forex debt that is maturing shortly, from the proceeds of forint debt issues that are exchanged from the MNB’s international reserves. The MNB announced in April plans to cut the stock of two-week bills from HUF 4,500 billion to HUF 3,600 billion as part of the its “Funding for Growth Scheme”. The cut would result from a €3 billion reduction in the central bank’s international reserves through trimming back the country’s short-term external debt. The MNB is also making a combined HUF 500 billion of 0% refinancing available to banks to support SME lending and to convert SMEs’ foreign currency-denominated loans into forints, in equal part. Nagy said banks are expected to submit bids for the two refinancing facilities by Friday, giving the MNB an accurate gauge of interest in the program.
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