Judicial Reforms 'Step Towards' Unlocking EU Funds - Fitch
Recently approved legislation on the judiciary addressing concerns over the rule of law aired by the European Commission are "a step towards unlocking some" of Hungary's suspended European Union funding, but the timing and size of eventual disbursements remain uncertain, Fitch Ratings said in a commentary published on Friday, according to a report by state news wire MTI.
Any disbursement of Recovery and Resilience Facility (RRF) funding "seems unlikely" before the end of Q3 2023, Fitch said.
Fitch noted that EU officials had said passage of the judicial reforms bill could help unlock a big part of suspended Cohesion Funds for Hungary, but that additional reforms would still be required for that to happen.
"While the impact of delayed disbursement on medium-term growth and public and external finances would be modest, EU funding remains a supportive and low-cost source of finance for Hungary, and further delays would highlight questions over policy credibility," Fitch said.
"Vulnerabilities from a policy mix influenced by political considerations, in the face of tougher external conditions, were a key driver of our decision to revise the outlook on Hungary's 'BBB' rating to Negative at our January review," the rating agency added.
Fitch's next review of Hungary's sovereign rating is scheduled for June 23.
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