International reserves fell EUR 2.8 bln in Q2 to EUR 24.8 bln by the end of June. Hungaryʼs short-term external debt fell EUR 700 million to EUR 19.8 bln in the period, meaning that the international reserves well exceeded the 1:1 ratio prescribed under the Guidotti-Greenspan Rule, the MNB noted. 

Short-term debt fell on the expiry of originally long-term debt in the quarter. The main factor here was the repayment of the last, EUR 1.6 bln tranche of a loan Hungary took out from the European Commission in late 2008 at the height of the financial crisis. Meanwhile, originally short-term debt rose.

Government sector short-term external debt dropped EUR 980 mln in the quarter to EUR 4.69 bln due to the shortening, to less than one year, of long-term debt. Other factors, including the rise of mark-to-market deposits, raised the amount.

Short-term external debt of non-financial companies rose by EUR 310 mln to EUR 8 bln, the rise reflecting mainly the shortening of originally long-term debt, the report said.

Short-term debt of the banking sector hardly changed and stood at EUR 7.07 bln at the end of June, as the increase in short-term external debt was compensated by the drop in shortening long-term external debt in the quarter.

Among factors reducing the reserves in Q2, an important one was the repayment of the last tranche of the 2008 European Commission loan.

The redemption of CHF-denominated foreign bonds in April, worth close to EUR 200 mln, as well as a close to EUR 1 bln redemption of domestic euro-denominated government bonds (PEMAKs) in May, also cut the reserves.

The reserves were also reduced by the June expiry of EUR 800 mln in FX swaps the MNB extended to banks related to the conversion of retail FX loans into forints.

In addition to MNB programs, the FX transactions and FX expenditure of the Government Debt Management Agency (ÁKK) also reduced the reserves.

The reserves were raised by Hungaryʼs first yen-denominated bond issue in April, worth close to EUR 140 mln.

Other factors increasing the MNBʼs reserves by more than EUR 1 bln combined included the inflow of EU funds, the change in the stock of the ÁKKʼs mark-to-market deposits, the redemption of a portion of FX loans granted under the MNBʼs Funding for Growth Scheme, and revaluations due to strengthening of the euro against some other currencies.