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Hungary to cut govt debt to 77% by July, says PM

The Hungarian government will reduce the country's state debt from 81% of GDP to 77% in a single step to be announced next week, Prime Minister Viktor Orbán told journalists in Belgrade on Tuesday.

"Hungary's state debt will be somewhere around 77% on July 1 instead of 81%," Orbán said after meeting with his Serbian counterpart Mirko Cvetkovic.

Orbán was probably referring to the withdrawal of government securities that are transferred to the state from private pension funds.

Hungarian private pension fund members had until the end of January to opt out of a move, together with their pension assets, to the state pension pillar. About 97% of private pension fund members are returning to the pillar.

Private pension funds must transfer the assets of members returning to the state pillar to the Pension Reform and Debt Reduction Fund by June 14. Government securities transferred in the portfolio will be withdrawn, thus reducing state debt.

László András Borbély, deputy CEO of Hungary's government debt management agency ÁKK, earlier said that the government securities in the private pension portfolio were worth the equivalent of 4-4.5% of GDP, and state debt could drop as a result by a similar rate in June.

More than HUF 2,800 billion in private pension fund assets are being transferred to the state pension pillar, pension fund association Stabilitás said early in June, citing preliminary data after the valuation date for the transfer.

Assets of private pension funds came to HUF 3,162 billion at market value on March 31, figures of financial market regulator PSzÁF show. Hungarian government securities accounted for 47.3% of the portfolio.

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