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The agency said the action follows the disclosure of Budapest’s liquidity position, highlighting concerns about the city’s capacity to repay all of its obligations as required by December 31, 2025.
Uncertainty around the timing and receipt of ordinary transfers, together with very weak liquidity to absorb unexpected cashflow gaps, materially increases the city’s near-term credit risk, it added.
Strained intergovernmental relations are evident in ongoing legal disputes over the amount of the solidarity tax to be paid by Budapest to the central government and the absence of the central government’s approval for new long-term borrowing by the city.
Moody’s noted that the ratings have also been placed on review for further downgrade. Previously the outlook was negative. This decision reflects the increased risk of default and the potential acceleration of repayment of the city’s long-term debt due to liquidity concerns. This includes any outstanding portion of the city’s HUF 40 billion overdraft.
Moody said the heightened risks stem from the unexpected delay in the disbursement of the transfers by the central government that the city had already budgeted.
Although Budapest indicated it will secure additional sources of liquidity to meet its obligations even if the ordinary transfers are not received, details on how these additional sources will be secured were not made available, it added.
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