Hungary's government decided on Tuesday to cut the country's state debt further through repaying two larger loans expiring in October and November without renewing them, Prime Minister Viktor Orban announced following a two-day cabinet meeting on Tuesday.
The debt cut will be worth about a combined € 4 billion and will reduce the ratio of state debt to the GDP by about 4 percentage points. within the total, € 3 billion will come from the called but unused part of a former IMF-led international loan, deposited with the National Bank of Hungary. The additional € 1billion will come from private pension fund assets transferred to the state earlier this year.
The debt reduction in the autumn will be the second one this year after a cut of about HUF 1,340 billion in June that resulted from the withdrawal of government securities the state received in the transfer of private pension fund assets.
Hungary's Maastricht-conform gross government debt stood at HUF 21,285 billion or 76.8% of GDP at the end of June according to preliminary National Bank of Hungary figures, down from 81.9% of GDP at the end of March, mainly reflecting the withdrawal of government securities in the private pension fund portfolio.
Hungarian members of private pension funds had until the end of January to opt out of a move, along with their retirement savings, back to the state pension pillar. About 97% of members returned to the state pillar, bringing some HUF 2,946 billion in assets with them.
The unused part of the IMF-led loan deposited with the NBH is part of the NBH international reserves that stood at € 36.106 billion at the end of July.