Minister of National Economy Gyorgy Matolcsy officially initiated talks Friday morning in Budapest with a delegation of officials from the International Monetary Fund (IMF)and the European Commission regarding the conclusion new type of financial agreement.
The government expects to start talks with a new IMF-European Commission delegation before Christmas and to conclude an agreement at the end of January or February, Mr Matolcsy told MTI.
The new delegation arriving before Christmas will include officials involved in reaching a financial agreement with Poland, he said.
Poland and the IMF have a flexible credit line agreement.
At the talks in the morning the IMF, the EU and the Hungarian government agreed long-term sustainable financial equilibrium can be based through structural reforms, Mr Matolcsy said, noting that the government has the will and necessary majority in parliament to carry out these. The programmes set out in the country’s Szell Kalman structural reform plan enjoy the support of the Prime Minister, Mr Matolcsy added.
The details of the agreement will be determined only during the talks, he said, "though any agreement we conclude will necessarily leave Hungary’s room for economic policy maneuvre intact and promote economic growth", the national economy minister said. Mr Matolcsy added that the government is not under pressure to quickly conclude an agreement with the IMF and the European Commission because it is financing its debt from the market.
The national economy minister emphasized that the agreement would be of a new type aimed at providing the financial underpinning for economic growth and would not, therefore, resemble that which Hungary concluded with the IMF and the EU in 2008.
Hungary has a current-account and trade surplus, its financial situation is one of the best in the European Union, the minister said.
"We have concluded the period of financial consolidation, we have reduced the government debt and everybody agrees that the government deficit will be under 3% next year."
The government is not, however, satisfied with growth, therefore it needs a new growth plan which has, however, big risks because of the unforeseeable developments with regard to the euro-zone debt crisis.
"This is why we need financial security. By concluding a new agreement we would like to obtain a kind of insurance for Hungary’s economic growth."
According to IMF rules as set out on its homepage, "the Flexible Credit Line (FCL) is for countries with very strong fundamentals, policies, and track records of policy implementation. It has no ongoing (ex post) conditions and no caps on the size of the credit line. The FCL is a renewable credit line, which at the country’s discretion could be for either one- or two-years, with a review of eligibility after the first year. There is the flexibility to either treat the credit line as precautionary or draw on it at any time after the FCL is approved. Once a country qualifies according to pre-set criteria, it can tap all resources available under the credit line at any time, as disbursements would not be phased and conditioned on particular policies as with traditional Fund-supported programs. This is justified by the very strong track records of countries that qualify to the FCL, which give confidence that their economic policies will remain strong or that corrective measures will be taken in the face of shocks."