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Government to rely on forint-based financing over the short term, FM says

Hungary's government should raise the proportion of forint-denominated financing for the meantime as it has no need of additional foreign-exchange financing over the short-term following last Friday's successful €1 billion eurobond issue, Finance Minister Péter Oszkó told the daily newspaper Népszabadság in an interview published on Thursday. The main objective of the foreign bond issue, which was not in the 2009 financing plan, was not to raise funding, but to further strengthen confidence in Hungary, Oszko said.

“There is not any urgent pressure on us. We are in a comfortable position with the IMF and EU (loan) contracts and should work on how to secure the highest possible rate of market finance after these contracts expire,” Oszkó said. Hungary plans to fully draw the remaining installments of a €20 billion IMF-EU package granted to the country last autumn, Oszkó said in response to a question regarding whether increasing forint market financing may make some of the remaining loans unnecessary.

The next consultations with the lenders will be held in August and November.

“At the consultations, we discuss when and by whom the remaining tranches would be called,” the Finance Minister said, noting that the latest installment was called down by the National Bank of Hungary in June (as opposed to the previous ones drawn by the Finance Ministry to finance budget debt). But “we have not conducted consultations where we had declared that we would not call dawn further tranches,” Oszkó added.

The IMF, EU loans offer Hungary financing resources at favorable terms, he said. That is, however, not an argument for extending the loans, the Finance Minister said in response to a question. He did not exclude, however, that a further, smaller loan package could yet help Hungary to stabilize its economic situation. At the same time Oszkó stressed that “active market presence is in our fundamental interest”. Yields will remain high if Hungary stays away from the markets, he said. Oszko told the newspaper that during a three-day roadshow to Frankfurt, Amsterdam and London in early July, he and other members of a Hungarian government delegation met with representatives from 30-40 institutions, most of whose questions concerned the sustainability of the government's program.

Regarding to the political risk with the elections due next spring, Oszkó said that there is a consensus among economic experts regarding the government's program. Political disputes are connected to preparations for the elections, he added. (MTI-Econews)