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Hungary net gov't financing requirement 4.5% of GDP in 2011 without pension transfer

Hungary's general government net financing requirement rose to 5.1% of GDP in the fourth quarter of 2011 and reached 4.5% of GDP for the full year, excluding the effect of transfers of private pension fund assets to the state, the National Bank of Hungary (MNB) said based on preliminary financial account data on Friday.

Gross general government debt, under the Maastricht definition, fell from 82.6% of GDP at the end of Q3 to 80.3% of GDP, or HUF 22,649 billion, at the end of Q4.

Including the pension assets transfer, Hungary had a net general government financing capacity of 5.0% of GDP in 2011, the preliminary figures show.

The adjusted net financing requirement was less, reaching 4.5% of GDP in Q4 and 4.3% of GDP in 2011, if the effect of a preferential-rate FX mortgage repayment scheme was also excluded.

Under a December agreement between the government and banks, the government will foot 30% of the losses banks suffer under the repayment scheme in the form of a deduction from the extraordinary bank levy. The MNB booked the commitment as a capital transfer from the government to households. 

The full-year figures compare to an unadjusted financing requirement of 4.5% and an adjusted ratio of 4.7% in 2010. 

The Q4 net financing requirement was up from a downward revised 2.5% of GDP in Q3 and 2.3% in Q4 2010. 

In nominal terms, the general government had a net financing requirement of HUF 1,416 billion in 2011, excluding the effects of both the pension assets transfer and FX mortgage repayments. Without these adjustments, the general government had net financing capacity of HUF 1,416 billion last year.

The net financing requirement of the general government was HUF 404 billion in Q4. Excluding the mortgage repayments, it was HUF 352 billion.

Despite large repayments worth HUF 1,047 billion in the fourth quarter, gross general government debt fell only HUF 282 billion from the end of September as the weakening of the forint raised forint-term debt by HUF 765 billion, the MNB said.

Q4 repayments included a €1 billion bond expiry in October and the first €2 billion installment on a loan package from the IMF and EU that Hungary signed for in 2008. The installment is to be paid to the EU late in November. 

The gross general government debt ratio fell from 81.3% at the end of last year, but debt rose in nominal terms by HUF 899 billion despite the withdrawal of government securities worth more than HUF 11,000 billion at nominal value transferred from the private pension assets. Including those withdrawals, 2011 repayments totaled HUF 2,238 billion, but were more than offset by the weakening of the forint which boosted debt by HUF 2,800 billion.

Net general government debt stood at HUF 14,384 billion or 51.0% of GDP at the end of 2011. Net debt fell HUF 641 billion in three months and was HUF 1,913 billion in a year.