Hungary plans to sell HUF 535 billion ($2.61 billion) less forint government bonds in 2009 than expiries and plans to use a significant part of a loan from the European Union and the IMF for financing.
The state debt agency ÁKK, which halted all bond issues in October when Hungary averted financial crisis only with a $25.1 billion rescue package from the IMF, the EU and the World Bank, said it would not restart regular government bond auctions in the Q1 of 2009.
The domestic debt market, which seized up in October, is slowly coming back to life partly helped by the central bank’s two surprise rate cuts carried out in the past two weeks after a 300 basis point emergency hike in October. But Hungary will be forced to use part of the EU and IMF funds for financing next year as global sentiment towards riskier assets, including Hungary’s bonds, remains poor.
ÁKK said that next year it planned to use HUF 1,430 billion worth of funds from mainly the loan granted by the European Commission in October, and planned negative bond issuance in local debt markets. The ratio of foreign currency borrowing within total borrowing will rise to around 32% this year, and further to around 36% next year, the ÁKK said. „We plan negative net issuance in the forint market,” ÁKK deputy CEO András Borbély told a news conference.
The ÁKK will only hold ad hoc government bond auctions in the Q1. “At present, we are forced to use this ... (international financing) package, but if the situation in the world improves faster, we hope we will be less and less forced to resort to these non-market type financing elements,” CEO Ferenc Szarvas said.
Hungary’s total net financing need will drop to HUF 832.7 billion next year from HUF 909.7 billion in 2008 as the budget deficit will fall. From the HUF 832.7 billion total amount, financing related to bonds of drug producer Richter will account for HUF 166.4 billion. (MTI-Eco, Reuters, Gazdasági Rádió, NG 4, NG 13)