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Striking IMF/EU deal by Nov would save more than HUF 100 bln in 2013, ministry calculates

If the government reaches an agreement on precautionary financial assistance from the International Monetary Fund and the European Union by the middle of November, improved investor confidence in the country would cut interest expenditures on state debt by HUF 7 billion in 2013 and HUF 102 billion in 2013, calculations by the National Economy Ministry sent to the Fiscal Council in August show.

The calculations, attached in National Economy Minister György Matolcsy's response to a question by an opposition MP on Parliament's website, assume that Hungary will strike a deal with the IMF/EU by the middle of November.

Changes in exchange rates, yields or the deficit could affect the projections, the ministry noted in the document sent to the Fiscal Council.

A 5% firming of the forint is expected to account for HUF 38 billion of the savings in 2013, with falling yields generating the rest. The firmer forint is seen generating most of the savings in 2012.

The ministry projected government securities yields would fall 50bp immediately after the deal is struck, then slip an additional 150 basis points by the end of 2013.

It assumed the forint would strengthen from about 288 against the euro to 266 against the euro by the end of 2013. The ministry put the average annual HUF/EUR exchange rate at 287.5 for 2012 and 271.44 for 2013.

The ministry submitted the document at the Fiscal Council's request on August 23. The body requested the supplemental information because of changes to the 2013 budget bill made between the time the bill was submitted in the middle of June and the vote on the bill's main figures a month later.

The Fiscal Council requested more supplemental information from the ministry late in August.