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Planned reforms by Opposition would require new IMF agreement, says Fidesz

The main opposition party Fidesz - if it wins parliamentary elections next spring - plans reforms of the state, the tax and contribution system and the higher education system, and it wants a new package of anti-corruption measures, all of which will require renegotiating Hungary's agreement on an €20 billion IMF-led financial support package, the party's economic expert said.

As a part of the state reforms, Fidesz wants to reduce the administrative burden and start reforms of the health care system, local government system, the Budapest public transport company BKV and railway company MÁV, said Matolcsy, a former economy minister.

The IMF, EU and World Bank provided Hungary with a €20 billion financial support package in the autumn of 2008, after the country's bond markets locked up. The loan can be drawn down until October 2010.

State reforms, cutting interest rates and increasing employment are at the center of Fidesz's economic policy, Matolcsy said. The state should offer incentives for direct investments by Hungarian companies abroad, he added.

Matolcsy said he projected next year's general government deficit to come in at HUF 1,300 billion – HUF 1,400 billion or about 7.3%-7.5% of GDP as against the government's target of 3.8%. He said he expected revenue from corporate tax to undershoot the government's projection by HUF 50 billion – HUF 70 billion and those from VAT by HUF 50 billion – HUF 80 billion in 2010, while spending could be significantly higher due to losses at the central bank, the consolidation of state railway company MÁV and hospitals, and other items.

Matolcsy said that Fidesz wants the health industry to provide the main engine of growth for Hungary. Construction, energy, agriculture, water and waste management, car manufacture and business services could also serve as economy drivers, he said.

Matolcsy said that there was little fiscal room for maneuver but monetary tools and EU funding could be used to perk up the economy.

He said that the Hungarian economy is currently frozen since financial institutions are avoiding risk, preferring instead to place their funds into the central bank's two-week depo. (MTI – Econews)