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Hungary willing to consider a standby agreement, State Secretary says

Hungary is willing to consider a so-called standby agreement with the IMF, The Wall Street Journal reported on Wednesday based on an interview with Gyula Pleschinger, State Secretary in the Ministry of National Economy, and a member of the Hungarian delegation designated to negotiate with the IMF and the EU on a financial backstop.

Mr Pleschinger said, however, Hungary is keen to avoid any measures that would harm the country’s efforts to reduce public debt and restart economic growth, WSJ wrote.

"We’ll see what is the best solution for both parties. There are a lot of uncertainties globally," Mr Pleschinger said. A precautionary agreement "would be a safety net. It could calm down markets and help our financial strength," WSJ quoted Mr Pleschinger.

The IMF said last week that a classic Stand-By Agreement (SBA) would best fit Hungary, and the country

could treat it as precautionary as it does not face an imminent financing need.

Mr Pleschinger said Hungary is aware that, having sought a deal with the EU and IMF, failing to conclude one would send a bad message. But he said he was confident, given the government’s strides in fiscal policies, that an agreement could be reached, WSJ went on.

Mr Pleschinger told WSJ that the jump in Hungary’s borrowing costs at recent bond auctions is also not an immediate threat, given the average interest rate Hungary is paying on its debt is very manageable at about 5.5%.

Roland Natran, a deputy state secretary at the Ministry of National Economy told the paper that the country has formulated a "plan to finance ourselves" in the event no deal is reached. Unspent money from the earlier (2008-2010) IMF and EU loan on deposit at the central bank can be used, Mr Natran told WSJ. The government could also refinance assets of the state oil company, MOL Nyrt, and pension assets, if needed, he said.

Still, Mr Pleschinger and Mr Natran both said, funding needs aside, a deal with the EU and IMF would be important psychologically, helping to rebuild confidence. "There is a very positive message if we have a deal with the EU and the IMF," WSH quoted Mr. Pleschinger as saying "It’s a good answer to rumors in the

market."

The officials dismissed one rumor making the rounds this week: that the government would seek to use central bank’s foreign-exchange reserves to pay down outstanding public debt. Both men told WSJ the government has no such intention and legally wouldn’t be able to even if it wanted. "It would be suicidal," Mr. Pleschinger said.

Tamas Fellegi, Hungary’s representative at talks with the IMF is scheduled to pick up informal talks with the fund in Washington, DC, next week. Mr Fellegi intends to meet IMF President Christine Lagarde and members of the board of directors at the talks, and then visit Brussels as the next step.