Report: Varga expects privatization of MKB Bank, Budapest Bank

Varga said that even after privatization of the two banks, the proportion of Hungarian ownership within the banking sector, which is approximately 60% of the balance sheet total at present, should not decrease.

If the value of forint to euro was around 308-310, it “would be better”, however, there is still a chance for the forint to stay firm this year, the economy minister told Reuters, commenting on the euro-forint exchange rate.

“Seemingly there is a strong, or mechanic link between the Fedʼs rate rise and an increase in our debt market yields. But in my view this is not necessarily so, because if yields diverge in emerging market countries then Hungary does not necessarily have to worry about its yields rising by a degree that would be justified by the Fedʼs rate change”, Varga told Reuters.

Varga told the news service that he expects state debt to decline from last yearʼs 76.2% of GDP, adding that the Hungarian government is planning a further reduction in the budget deficit to 1.7% of GDP in 2017 and 1.6% in 2018, less than this year’s 2.4%.

Commenting on Hungary’s planned issuing of yuan-denominated bonds based on a deal the government signed with China in November, the economy minister said it was a “very important” step. The upper limit of this issue could be 3 billion yuan and Hungary would decide later next year whether it would tap international markets in other currencies as well or refinance expiring debt from domestic issuance, Hungarian news agency MTI reported.

“Weʼll see around the end of February how yields perform, whether debt agency ÁKK should continue to be active in the domestic market or go out again [to international markets],” Varga told Reuters.