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Hungary govt to keep 2012 fiscal deficit under 3% of GDP, PM says

MNB

The Hungarian government aims to keep next year's fiscal deficit under 3% of GDP to keep state debt on a downward trend, Prime Minister Viktor Orbán told Parliament on Monday.

Hungary's state debt rises when the fiscal deficit is over 2.8% of GDP and it falls when it is under this threshold, Orbán explained.

National Economy Minister György Matolcsy said last week the government aimed to bring the fiscal deficit under 3% in 2012. The target is a little looser than the 2.5%-of-GDP target in Hungary's updated Convergence Program updated in the spring.

Steps to keep state debt on a declining track include a new cardinal act on stability, Orbán said on Monday. The act, which must be approved by a two-thirds majority in parliament, will specify the harmonized order of operation of the pension system, the health system, the tax system and the system of local governments.

Orbán noted that state debt was reduced from 82% to 77% of GDP in a single step in the summer and would drop again in October and November when expiring loans from the EU and the IMF are repaid without taking out new loans, Orbán said.

Last week, Orbán said Hungary would reduce debt by €4 billion or 4% of GDP in the autumn, by repaying €3 billion in loans due in October-November plus an additional €1 billion from the sale of foreign shares received as part of the transfer of private fund assets in June.

Hungary's Government Debt Management Agency (AKK) issued €4 billion of bonds in March-May, raising, as planned, the funds to refinance this year's €4 billion in expiring foreign debt.

Hungary repaid a €1 billion bond in June, and is due to repay another €1 billion bond late October and €2 billion to the European Union -- the first principal repayment on an IMF-lead international package approved to Hungary in the autumn 2008 -- in November.

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