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Fitch: IMF package mitigates financing risks, vulnerabilities remain

  The “huge” IMF-led financial package that Hungary received following the severe hit its assets had suffered late last year has significantly mitigated the external financing and currency risks for this year, but has not completely eliminated “the issues”, a senior London-based credit ratings official said on Thursday.

Speaking at the “Sovereign Hotspots” seminar on global emerging markets held by Fitch Ratings in London, Ed Parker, head of Emerging Europe Team, told Econews that the “huge scale” of the package, worth more than $20 billion, reflected a number of factors, including Hungary’s good ties with the EU and the IMF.

The EU also didn’t want to start to see “a waive of dominos going through Eastern Europe”. If that was to happen, Western European banks would also have faced severe problems, and then “you might start to see contagions spreading even within the euro zone”, he added.

However, Hungary still needs to get reasonably high rollovers on its external debt from foreign parent banks, so the Hungarian economy continues to be exposed to the global financial environment, Parker said. For 2009, “I don’t think there is a big financing risk ... but some of the long-term underlying vulnerabilities are still there”, he added.

Fitch currently rates Hungary’s long-term foreign currency debt at ‘BBB’ with stable outlook. (MTI-Econews)