Hungary's government debt could reach around 80% of GDP by the end of 2009, the Finance Ministry projected, calculating with a HUF/EUR rate of 295, weaker than the present rate of 278.8.
The recession will cut nominal GDP, the Finance Ministry said, noting that any one percentage-point change in the nominal GDP generates a 0.8 percentage-point change in the debt ratio.
At the end of March, general government debt 82.7% of GDP, according preliminary figures calculated using Maastricht methodology. In nominal terms the debt stood at HUF 21,789 billion (EUR 78.2 billion) at the at the end of the first quarter of 2009, up HUF 2,470 billion, or 7.8%, from the end of 2008.
The general government financing requirement was HUF 286 billion during the first quarter of 2009. Debt rose far more than the financing requirement because of a significant revaluation effect - the weakening of the forint raised forint-term debt by more than HUF 1,300 billion in the quarter -, and because of a significant increase in the stock of government deposits.
Government deposits at the National Bank of Hungary (NBH) totalled HUF 2,081 billion at the end of Q1. Deducting these deposits, debt was net HUF 19,707 billion, or 74.8% of preliminary GDP at the end of March.
According to Government Debt Management Agency (AKK) data calculated using cash-flow based GFS methodology, government debt was HUF 19.206 billion at the end of April, up HUF 1.102 billion from the beginning of the year.
Net debt, after deducting the disbursed but unused part of the IMF-EU-World bank credit deposited at the NBH, was HUF 17.667 billion. These deposits fell in April as AKK covered its early bond repurchases from the international loan package.
The proportion of currency within the net debt, as calculated by AKK, was 33.3% at the end of April. The ministry noted that the ratio did not increase any significantly as AKK swapped part of the Fx loans into forints.
The value of government bonds in the hands of foreign investors dropped HUF 320 billion between the middle of February and the end of April, the report said noting the significant negative net bond issuance in the period.
The government securities market was characterised by low liqudity and sharply rising yields up to the middle of March, with primary sales limited to discount T-bills.
Yields has fallen, however, sharply since the middle of March, driven by a globally increasing propensity to take risk, and also by AKK's new policy of extending its early bond repurchase programme to regular weekly reserve auctions and to bonds maturing up to 2012. The two factors combined made it possible for AKK to relaunch - with limited volumes - regular bond auctions.
AKK suspended bond auctions at the end of last October as the market dried out on the effect of the global financial crisis, and just after the IMF, the EU and the World Bank approved a combined EUR 20 billion standby loan for Hungary. Auctions of discount T-bills has been going on uninterrupted. (MTI-Econews)