Hungary will pay an annual stand-by fee of 0.25% and interest of 5-6% on a €20 billion credit line from the IMF, the EU and the World Bank, National Bank of Hungary governor András Simor said at a press conference on Wednesday.
Hungary may call down the credit until the end of March 2010, Simor said. The repayment term is 3-5 years. The purpose of the credit line is to strengthen the confidence in Hungary of global money and capital markets, as well as to help finance the current account balance, he said.
The size of the credit line is twice as big as the amount of government securities in foreign hands and five times as big as foreign currency government debt maturing next year, Simor said The credit line is “front-loaded”, that is, the bigger part can be called down at the beginning of the run, IMF chief advisor Anne-Marie Gulde said.
The government will decide on calling down the credit line, Simor said. If it is called down, the money will be placed in the MNB's foreign currency reserves, thereby raising Hungary's foreign currency reserves.
Answering a question, Ms Gulde said the €20 billion is stand-by credit and does not have to be used. Its aim is to create security and boost confidence, she added.
Director of the EU's DG ECFIN Elena Flores said the EU aims to support fiscal consolidation, bringing the budget closer to a positive balance, and to increase liquidity. Hungary must continue to keep a tight rein on public expenditures, and fiscal as well as structural reforms must be continued, she added. Answering a question, Ms Gulde said taxes can be reduced only after state spending is cut. (MTI-Eco)