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Hungary to cut fiscal deficit by further 0.4% of GDP

Hungary will cut a further 0.4% - or Ft 103 billion - of its accrual-based fiscal deficit in terms of GDP to 3.4% this year compared 4.3% originally targeted in the convergence program and reduced to 3.8% earlier this year, Finance Minister János Veres announced.

Veres commented that the new deficit target of 3.4% is conservative, adding that the eventual 2008 deficit in terms of GDP could be even lower than this. The finance minister said that the government will submit its new, projected 2009 macroeconomic course and a modified version of the budget to parliament on Saturday. Veres said he expects a general government deficit of 2.9% or 2.6% corrected for pensions in 2009.

Veres said that the government is planning to freeze its Ft 57 billion chapter balance reserves and general budget reserves by Ft 20 billion, while it will also decrease expenditures by cutting the budgets of the labor-market fund and research and technology fund by Ft 5 billion each. The government will cut co-financing for EU subsidies by Ft 16 billion as well, Veres added.

“These items will have an effect on both the cash-flow and accrual-based budget,” Veres said. The finance minister noted that the State Debt Management Center ÁKK will issue Ft 200 billion less in government bonds as a result of the cut in expenditures.

Veres also said on Thursday that as a result of Thursday-morning negotiations Hungary's parliament will support the government's proposed spending ceiling and bill on public finances aimed at maintaining budget discipline and ensuring that the deficit declines steadily and remains sustainable and small.

“The government is working to generate sufficient liquidity on the government-bond market,” Veres said. The finance minister added that the Government Debt Management Center's Wednesday announcement that it would reduce its planned net forint issues by Ft 200 billion for the remainder of 2008 would relieve the current pressure on Hungary's bond market. (MTI – Econews)