Hungary is expected to use €7 billion - €8 billion of the €20 billion international credit line it received from the IMF, the EU and the World Bank last autumn to finance the budget deficit and renew expiring debt in 2009, László András Borbély, deputy CEO of the Government Debt Management Centre (ÁKK) said in an interview published in Friday's issue of daily Népszabadség.
He expects demand for Hungary bonds to remain moderate throughout the year.
Borbély noted that Hungary already used €1 billion from the package to finance the budget at the end of last year and that this year's figure includes the money spent on the early repurchase of forint bonds. One aim of the early repurchases is to reduce future financing needs, he added.
Adding the funds designed to support the stability of the banking system (a combined €2.4 billion in loans granted to three banks - OTP, FHB and MFB - to facilitate lending, and another €2 billion in deposit to cover eventual state injections or guarantees to domestic banks), Hungary could use some €13 billion by the end of 2009, Borbély said.
The remainder of the credit line, as well as part of the credit called but not yet used could help financing for 2010 if a lack of improvement on the global and domestic securities markets make it necessary.
While terming Thursday's bond auction a success, Borbély said that demand, both foreign and domestic, for domestic bonds was still moderate and is expected to remain so for the remainder of the year. Discount T-bill auctions has been held uniterrupted and are expected to provide some net financing for the whole of the year, he said.
Borbély noted that Thursday auction was well oversubscribed, yields were flat or fell compared to the respective secondary market benchmarks and the spread between maximum and minimum yields was relatively narrow. The auction was just the second one since ÁKK suspended bond auctions in October and starts the relaunch of regular bond auctions.
ÁKK has received several offers for foreign currency issues after the recent drop of the country's risk premium, Borbély said when asked when they could return to global markets. The spread to be paid, however, still well exceeds the interest payable for the international credit package. Hungary could issue a foreign currency bond sooner if the government deems it necessary to promote confidence in the country, or it could wait until later, when the premium falls further, he added. (MTI – Econews)