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Hungary on track with undertakings under IMF loan

The Hungarian government has carried out the obligations it had undertaken under a €20 billion loan package it signed with the IMF, the European Union and the World Bank, James Morsink, head of an IMF delegation visiting Hungary said.

The IMF delegation paid a ten-day visit to Hungary on the first of regular reviews under a EUR 12.5 billion IMF standby facility.

The IMF expects Hungary's GDP to contract by 3%-3.5% this year while the general government deficit would stay within 3% of GDP, Morsink told the press.

The IMF official welcomed the structural reforms announced by the Hungarian Prime Minister in Parliament earlier in the day.

An economic correction was inevitable in Hungary because of its high level of state debt and the difficulties of external funding, Morsink said.

The government has called €4.9 billion IMF loan and €2 billion of the €20 billion loan package, and spent it to increase central bank international reserves as well to finance the government, Finance Minister János Veres said.

The government has not changed the 2.6%-of-GDP deficit target for this year, Veres said.

Earlier in the day Prime Minister Gyurcsány told Reuters that the budget deficit can be kept below 3% of GDP even if GDP contracts 3.5%, adding that “Today various budget scenarios reckon with a 2.7%-2.9% deficit.” (MTI – Econews)