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Govt papers in pension fund assets to reduce state debt 4-4.5% of GDP by June

The assets to be transferred to the state by private pension funds could contain government securities amounting to 4-4.5% of GDP, and state debt could drop as a result by a similar rate in June, László András Borbély, deputy CEO of Hungary's Government Debt Management Agency (ÁKK) said on Thursday.

Private pension funds must transfer the assets of their former members to a newly created Pension Reform and Debt Reduction Fund by June 12. Government securities transferred in the portfolio will be withdrawn, thus reducing state debt.

State debt will be reduced by the combined nominal value of the government securities transferred, Borbély said.

ÁKK, the fund's manager, will have precise and detailed information of the assets only after the transfer takes places, he said, but the government papers in the portfolio themselves could be sufficient for the bulk of the planned five percentage-point reduction of state debt to GDP.

The government's updated convergence program targets a drop in Hungary's gross Maastricht government debt from 80.2% of GDP at the end of 2010 to 75.5% at the end of 2011.