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January-June general govt deficit 87.4% of revised full-year target

Hungary's cash flow-based general government deficit, excluding local councils, was HUF 1,034.6 billion in January-June, or 87.4% of the  revised full-year target, the National Economy Ministry said, confirming preliminary figures on Thursday.

Citing the uneven timing of some revenue items, the ministry expects the full-year ESA deficit target of 2.94% of GDP will be reached.

The deficit targets are calculated excluding the effect of the transfer of private pension fund assets of former fund members, to be accounted as revenue under ESA, and without expenditures of the takeover of the debt of transport companies MAV and BKV and the planned buyout of public private partnerships (PPPs).

The ministry left its June projection unchanged and continues to project the cash flow-based central government deficit will reach HUF 1,479.7 billion, or 125%, of the full-year target by the end of September before finishing the year at 100.0% of the full-year target. The general government is projected to have a deficit of HUF 445.1 billion in the third quarter and a surplus of HUF 295.5 billion in the fourth quarter of 2011.

Hungary's Parliament recently revised the full-year target to HUF 1,184.2 billion. The target was upped from HUF 687.4 billion earlier, reflecting the state's €1.88 billion purchase of a 21.2% stake in MOL from Russian peer Surgutneftegas in a deal announced in May.

Adjusted for the pro rata effect of the revenues the budget is to receive from the private pension fund assets transferred to the state Pension Reform and Debt Reduction Fund, the January-June deficit would be reduced to HUF 770.2 billion, or 65%, of the full-year target, the ministry said.

The transfer of the assets to the fund was completed by the middle of June, but the HUF 528.8 billion revenue due to the budget under the 2011 Budget Act will not be booked until the second half of the year, the ministry said.

The central budget ran a HUF 907.4 billion deficit in January-June and the social insurance funds showed a HUF 188.7 billion gap, but separate state funds had a HUF 61.5 billion surplus.

The cash flow-based deficit was 310.4 billion in June alone. The central budget had a HUF 280.7 billion deficit and the social insurance funds were HUF 34.9 billion in the red, but separate state funds had a HUF 5.2 billion surplus.

As in the preliminary report, the ministry said net interest expenditures fell by HUF 13.6 billion to HUF 125.6 billion from the same month a year earlier because of a reduction in state debt. Government securities transferred from the private pension assets and withdrawn caused interest expenditures to drop by HUF 8 billion in June, it said. Average yields were about the same as a year earlier, it noted.