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Parliament approves amendments to 2006 Budget Act

Parliament approved on Monday amendments to the 2006 Budget Act which raise the cash flow-based expenditure target Ft 348.2 bln to Ft 7,844.9 bln and lower the revenue target Ft 42.2 bln to Ft 5,923.5 bln. The amendments raise the central budget deficit target Ft 390 bln to Ft 1,921.3 bln. The accrual-based target is unchanged at 10.1% of GDP.

The changes narrow the gap between the cash flow- and accrual-based deficits. The government explains the higher-than-expected expenditures citing increased costs of the Pension and Health Fund, changes to centrally-regulated gas prices and one-off items, including Ft 352 billion in debts related to motorway construction which were taken over by the state, Ft 70 billion in costs related to Hungary's lease of Gripen fighter aircraft and Ft 4 billion in forgiven debts of public broadcaster Magyar Televizió. The amendments will take effect on the eighth day after their announcement. Parliament also approved on Monday a separate bill designed to ensure the implementation of the 2007 Budget Act necessary to allow the budget's main targets to be met and make the budget more transparent.

One of the amendments changes the way budget-funded institutions are financed, allowing the state to take out all taxes from funding before it is transferred to the institutions in order to prevent them from running in debt on what they owe to the state. Another amendment places restrictions on any contracts longer than a year signed by budget-funded institutions. The government will be required to report on these long-term contracts when the budget is closed. The amendments also require the Finance Ministry to publish debts of the general government both excluding and including local governments every three months. The ministry must calculate the debt using the Maastricht Debt Index when the budget is closed (Mti-Eco)