Hungary's government is not considering implementation of assistance measures to help municipalities with foreign-currency-denominated debt in the same that way it has moved to support individuals with fx-denominated mortgages, President Pál Schmitt said in an interview with Dow Jones Newswires and The Wall Street Journal on Friday.
Hungary's government has introduced a plan to allow early repayment of foreign-currency-denominated mortgages at a below-market, fixed exchange rate.
However, the government does not intend to offer the same arrangement to municipalities. "There is no plan to help the municipalities," Schmitt told Dow Jones Newswires and The Wall Street Journal. "We have enough problems at the national level."
Hungary's local councils have outstanding debt of HUF 1,230bn at the end of June, including little more than HUF 600bn in bond according to preliminary National Bank of Hungary figures. About 85% of municipal bonds are denominated in foreign currency, many of them in Swiss francs. About 89% of the bonds were subscribed by domestic banks. The rest are held by foreign entities.
Most of the bonds were issued in 2006-2008, but mainly in 2007, the bulk of them having 20-year runs with three-year grace periods, thus principal payments will start on many this year.