Parl't approves 2023 budget

Parliament

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MPs approved the government's 2023 budget bill in a vote on Tuesday, according to a report by state news wire MTI.

The budget was cleared with a vote of 135 for, 54 against, and a single abstention.

The budget targets revenue of HUF 31.074 trillion and expenditures of HUF 33.426 tln, with a cash flow-based deficit of HUF 2.352 tln.

Presenting the bill to lawmakers six weeks earlier, Finance Minister Mihály Varga said the "clear goal" of the 2023 budget was to protect the regulated utilities price scheme for households and strengthen the country's military defense. The government's draft budget preserves the results achieved so far while ensuring security for families and keeping the economy on the growth path, he added.

The budget shows expenditures of HUF 670 bln of a fund established to protect the regulated utilities price scheme and expenditures of HUF 842 bln of a fund to support defense developments. Both funds have their own independent budget chapters.

The Utilities Defense Fund will get HUF 242.3 bln in revenue from a windfall tax on the energy sector, HUF 240 bln from mining royalties, HUF 30 bln from an extraordinary contribution by airlines and HUF 96.4 bln from a sectoral tax on telecommunications companies.

The Defense Fund will get HUF 337.9 bln in revenue from payments by financial institutions, HUF 323.5 bln from the financial transactions duty and HUF 179.7 bln from a sectoral tax on insurers.

The budget targets a general government deficit, relative to GDP, of 3.5% and a year-end state debt ratio of 73.8%. It assumes 4.1% GDP growth and 5.2% average annual inflation.

"The 13th-month pensioners' bonus will remain in place in the coming years, family subsidies will continue, and pensions will rise further at a rate in line with inflation," according to the reasoning.

"Because of the Russian-Ukrainian war and Brussels' energy and sanctions policy, the most important task is preserving Hungary's peace and security, ensuring the country's energy supply and protecting the regulated utilities price scheme," the reasoning shows.

The law establishes that extra budget revenue generated by GDP growth over the 4.1% assumption must be used to reduce the deficit. The primary deficit, which excludes the cost of debt servicing, is set to reach 0.3% of GDP, calculated according to the European Union's ESA accounting rules.

The government aims to preserve the 1 million jobs created since 2010, while supporting the creation of more workplaces, too. Taxes on labor will "continue to remain low", while state subsidies are targeted at investments that create jobs, boost efficiency and contribute to higher levels of value added. In line with the expected rate of economic growth, the average wage could "rise over 10%", the reasoning shows.

The budget targets expenditures related to EU-funded developments of HUF 3.408 tln, while transfers from Brussels for those programs are set to reach HUF 2.057 tln.

The authors of the legislation lay down four main goals for the government's debt management strategy: the gradual reduction of state debt relative to GDP, maintaining the FX debt ratio within a range of 10-25%, increasing the share of state debt held by households, and extending the maturity profile of the debt.

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