IMF/EU deal would cut Hungary yields 1.5-2pp

MNB

Reaching an agreement on financial assistance from the International Monetary Fund and the European Union could reduce yields on Hungarian government securities by 1.5-2 percentage points, saving HUF 100 billion-130 billion in debt servicing costs in 2013, National Economy Ministry state secretary Gyula Pleschinger said in an interview with MTI.

An agreement with the IMF/EU could also reduce the level of the National Bank of Hungary's international reserves, which would also mean savings, Pleschinger said.

He added that it would be unwise to "burn up reserves in an economic environment threatened by crisis", thus the country's almost €5.5 billion worth of debt -- excluding discount treasury bills -- turning over this year would be refinanced on the market.

Pleschinger said the Government Debt Management Agency (AKK)'s forint securities issues had exceeded plans. As a result the debt manager had repaid from forint issues about HUF 180 billion in maturing foreign currency debt [to the IMF] in February and about the same amount again in May, exchanging the forints into euros.

Pleschinger said a final vote on a planned duty on financial transactions might not take place until the beginning of July. Until then, the bill can be "fine-tuned" as long as it generates revenue of HUF 130 billion next year, he added.

He acknowledged that several more rounds of talks with banks would be necessary before a bill is produced that is in line with an agreement signed by the Hungarian Banking Association and the government last December, and that causes as little damage as possible to the economy while "whitening" the shadow economy.

Under the December agreement, the government promised not to take any decisions that would negatively affect the financial sector without first consulting with banks and to halve the extraordinary bank levy in 2013.

Pleschinger noted that there was limited room for consultations before the government submitted the bill on the transaction duty because it had to take urgent measures as part of an ongoing excessive deficit procedure against the country by the European Commission.

Asked whether the transaction duty would not cause lending activity to slow further, Pleschinger said it was the task of banks to support the government's growth strategy, adding that foreign parent banks should have confidence in the Hungarian economy and end the withdrawal of capital from the country.

He said banks would shoulder 75-80% of the duty and retail clients 20-25%.

ADVERTISEMENT

Varga puts 2021 GDP growth at 7-7.5% Analysis

Varga puts 2021 GDP growth at 7-7.5%

Opposition parties to begin PM candidate primaries Elections

Opposition parties to begin PM candidate primaries

New managing director at the helm of Wolt Hungary Appointments

New managing director at the helm of Wolt Hungary

Budapest bike-sharing scheme boasts record ridership City

Budapest bike-sharing scheme boasts record ridership

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.