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Hungary cash flow-based govt deficit 6.2% of GDP in 2011

Hungary had a cash flow-based general government deficit, excluding local councils, of 6.2% of GDP last year, National Economy Ministry deputy state secretary Peter Banai said late Monday, after the ministry published a second reading of general government data.

The ministry confirmed the full-year cash flow-based general government deficit of HUF 1,734.4bn, exceeding the modified full-year target by HUF 157.3bn or 10% in the second reading.

The cash flow-based data show Hungary’s accrual-based general government ran a surplus of HUF 976bn, or 3.5% of GDP, including one-off items, Mr Banai said.

The cash flow-based overshoot was due to the HUF 250bn, in VAT refunds the state was required to pay under a ruling by the European Court, Mr Banai said. About HUF 220bn of the refunds was paid out in December.

He explained that the ministry had not included the VAT refunds in November when it forecast the cash flow-based deficit would finish the year at 100% of target. He added that excluding the VAT refunds, the deficit was a bit narrower than planned.

Parliament amended the full-year target by a further HUF 60bn to HUF 1,577.2bn in December to reflect a second HUF 60bn capital increase at the state-owned Hungarian Development Bank (MFB), Mr Banai said.

The original HUF 687.4bn cash flow-based deficit target was amended upwards several times during the year, and the full-year deficit was about 2.5 times the original target.

MTI calculated that one-off and special revenue items of the central government reached HUF 817.4bn last year. These included HUF 459bn of revenue from the Pension Reform and Debt Reduction Fund, into which assets of private pension fund members returning to the state pension pillar were placed, HUF 186.5bn from the extraordinary bank levy and a further HUF 171.9bn from sectoral crisis taxes, that is, extraordinary taxes levied on the telecommunications, retail and energy sectors for three years from 2010.

The extra revenues compare to HUF 1,114.6bn of one-off items on the expenditure side. The extra expenditure items included the purchase of shares of Hungarian oil and gas company MOL for HUF 498.6bn, which was financed from the drawn but unutilised part of Hungary’s IMF-EU standby agreement, signed late in 2008, at the height of the global crisis.

In addition to the MOL share purchase and the VAT refunds, the ministry listed a combined HUF 120.0bn capital raise at MFB, the takeover of HUF 50.0bn in debt from state-owned railway company MAV and the takeover of HUF 196.0bn in debt from county councils among one-off spending items.

Excluding these one-off items, the cash flow-based deficit would have reached HUF 619.8bn, under the original target of HUF 687.4bn, the ministry said on Monday.