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Hungary's economic plans welcome, says IMF rep

Plans by Hungary's government to cut spending as part of structural measures are welcomed, the IMF's representative in Hungary told public radio on Wednesday.

Plans by Hungary's government to cut spending as part of structural measures are welcomed, the IMF's representative in Hungary told public radio on Wednesday.
Irina Ivashchenko told MR1 that it appeared the Fidesz-led government was planning structural changes, which would help the country's finances in the long term. "On the basis on intentions and reports, I think the measures are of a structural nature and for the long term, which is very encouraging, falling in line with our recommendations," she said.
The government is to finalise a reform package on February 28.
 Ivashchenko said it was important that the plans targeted greater efficiencies and reducing spending on state-owned companies. She said it was necessary to reform the welfare system to make it sustainable. The incorporation of the job-growth programme into welfare was important, she added.
The government has identified potential fiscal savings amounting to HUF 600-660 billion. Ivashchenko said this figure was reassuring, but she still awaited the details. The IMF representative told MR1, however, that if nothing on the fiscal front is done before 2013 then upward pressures would be exerted on the budget deficit, with repercussions for Hungary's high level of national debt.
 Ivashchenko said several measures could undermine the sustainability of the public finances, such as the government's pension model, whereby it assumes a long-term commitment to provide pension payments. Further, the temporary "crisis" taxes have rocked investor sentiment, she said.
She said the question of how detailed, brave and fast the refor would be was key.
"It is not easy to implement changes in several areas, and this requires bravery and expertise,"  Ivashchenko added.
On the question of Hungary's growth potential, she told the programme that she was in agreement with the government that it was "for the time being fairly modest".
The IMF's country report, soon to be published, will include concerns about the weakening of economic governance in Hungary. "Here we're talking about the axing of the Fiscal Council or the nature of relations between the government and central bank," she said. (Econews)