ÁKK chief: Hungary to reduce and diversify FX debt further

MNB

 Hungary has improved its financial position in terms of risks in the past few years as the share of FX-denominated debt in foreign hands fell and that of domestic retail investors rose, György Barcza, the new CEO of the Government Debt Management Agency (ÁKK) said in an interview with MTI. 

Barcza, who took office on February 1, said diversification of the ownership and FX structure of debt is a way to reduce risks and should continue. The considerations of government, central bank policy and those of the government debt manager should be harmonised, the new CEO said when asked whether ÁKK had a specific schedule for the further reduction of the share of FX debt.

The FX share of state debt fell to 36%-38% by the end of 2014 from 44% in 2011, including loans from the IMF and the EU. Barcza said the state of Hungary and the central bank together had net FX-denominated foreign assets of €3.6 bln at the end of last year while they had net FX debt of €6.5 bln at the end of 2010, noting a sharp drop of both the country's gross and net foreign FX-denominated debt during the period.

These developments reflect both reduced FX issues and net transfers from the European Union that raise international reserves, he added. his year's financing plan includes no FX issues, with the exception of "residency bonds", to the tune of HUF 160 bln, the ÁKK CEO said. He said the issues of the securities, which accelerate applications for permanent residency in Hungary by foreign nationals, are among ways to diversify the ownership structure of state debt. Retail demand for government securities has risen, Barcza said.

Retail investors' share of state debt rose to 9.5% by Q3 2014 from just 2% in 2010, which also increases diversity, he added. Barcza termed it strange that Hungary's credit rating had not changed in five years despite a more stable financial sector, dropping FX exposure and falling interest expenditures because of lower rates and debt ratios.

The state debt-to-GDP ratio could drop 1.5%-2% a year if the fiscal deficit is 2.5% of GDP and nominal GDP rises more than 4%, getting closer to the 50% threshold set in Hungary's constitution, he said.

ADVERTISEMENT

Business confidence falls slightly in June Analysis

Business confidence falls slightly in June

Lawmakers approve 2022 budget Parliament

Lawmakers approve 2022 budget

Duncan Graham reelected as BCCH president Appointments

Duncan Graham reelected as BCCH president

Budapest launches revamped coupon card for visitors City

Budapest launches revamped coupon card for visitors

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.