Hungary general govt financing requirement drops, debt rises in Q3


Hungary’s general government net financing requirement fell to 2.9% of GDP in the third quarter and reached 4.2% of GDP in the four quarters ending with Q3, excluding the effect of transfers of private pension fund assets to the state, preliminary financial account data published by the National Bank of Hungary (MNB) on Wednesday show.

Gross state debt, under the Maastricht definition, rose from 76.7% of GDP at the end of Q2 to 82.0%, or HUF 22,929bn, at the end of Q3, boosted mainly by a weaker forint, the MNB said. It was up HUF 1,693bn from the end of June. About one-third of the increase came from new debt issues, the bank added.

The debt ratio was the third-highest ever, lower only than the 83.9% ratio at the end of Q2 2010 and the 82.6% ratio at the end of Q1 2009.

Adjusted for the transfer of the private pension fund assets, the net financing requirement - an indication for the general government deficit in the period - rose slightly in the four quarters ending Q3 from 4.2% in the previous four-quarter period and was well over the 2.9%-of-GDP fiscal deficit target. However, household savings have comfortably financed the gap since Q1 2011.

The Q3 financing requirement was down from 5.7% of GDP in Q2. Adjusted for seasonal factors, the Q3 financing requirement was level with the 3.7% in Q2. Compared to the same period a year earlier, the unadjusted financing requirement rose and the seasonally-adjusted one fell.

Including the transfer of private pension fund assets to the state, which took place in June but was accounted in January, Hungary had a net general government financing capacity of HUF 1,499bn or 5.4% of GDP in the four quarters ending Q3.

Gross debt fell in Q2 mainly because of the withdrawal of government securities that were part of assets of former private pension fund members who returned to the state pension pillar.

In Q3, revaluation effects, including exchange rate changes, added HUF 75bn to general government liabilities, boosting gross general government financial assets by HUF 910bn and raising general government liabilities even more, by HUF 985bn. Revaluation changes added HUF 402bn to liabilities on securities and raised liabilities on loans by HUF 578bn.

Transactions raised gross assets by HUF 651bn and lifted gross liabilities by HUF 860bn.

Among assets, listed share holdings of the government rose by HUF 468bn, mainly reflecting the state’s purchase of a 21% stake in oil and gas company MOL from Russian peer Surgutneftegas in July. Price and exchange rate changes reduced the value of the listed share portfolio by a sharp HUF 272bn in the quarter to HUF 664bn.

Apart from the MOL stake, most of the listed shares came from the private pension fund portfolios as did the investment fund units. About HUF 431bn of the HUF 971bn of investments fund units received from the private pension funds in June was sold in Q3. The proceeds from the sales may have ended up in general government deposits which rose by HUF 510bn in the quarter.

Among liabilities, the largest single factor was HUF 459bn of loans taken out in Q3, including HUF 389bn in long-term loans. About HUF 377bn of the loans taken out were in foreign exchange. According to earlier information €490m of European Investment Bank development loans were taken out during the quarter.

Liabilities on securities rose HUF 312bn in Q3, as a balance of HUF 503bn of net bond issues and HUF 186bn of short-term bill repayments, all domestic.

The MNB accounted as a rise in other debt in Q3 the estimated HUF 272bn in VAT the state must refund companies under a European Court ruling. It also accounted as a rise in central government debt the HUF 35bn of bonds issued by state-owned railway MAV.

Net general government debt rose by HUF 285bn to HUF 15,114bn, or 54.1% of GDP, in Q3, but was still HUF 1,193bn under the level at the end of 2010, when it stood at 60.1% of GDP.

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