Parl't Approves 2024 Budget

Parliament

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Lawmakers approved the government's 2024 budget in a vote on Friday, according to a report by state news wire MTI.

The budget was passed with a vote of 121 for, 44 against, and no abstentions.

The budget targets revenue of HUF 38.24 trillion and expenditures of HUF 40.755 tln The deficit target is HUF 2.515 tln.

The budget targets a 2.9%-of-GDP fiscal deficit and a year-end state debt-to-GDP ratio of 66.7%, down from an anticipated 69.7pc at end-2023. It assumes average annual inflation of 6% and GDP growth of 4%.

The 2024 budget allocates nearly HUF 1.31 tln for the National Defense Fund. In the 2023 budget, HUF 842.0bn is earmarked for the fund to bolster the country's defense capabilities. 

The expenditure target in the budget for a fund established to maintain the regulated utility price scheme for households is HUF 1.341 tln.

The fund's expenditures are set at HUF 2.58 tln in the 2023 budget. 

Central budget support for the fund is set at HUF 483 bln in the 2024 budget, while payments, contributions, and windfall profit taxes from companies in the energy, mining, telecommunications, airline, and pharmaceutical sectors will cover the rest of the fund's expenditures.

Expenditures of the pension insurance fund are set at HUF 6.02 tln in the 2024 budget, up from HUF 5.555 tln in the 2023 budget.

Expenditures on state investments are targeted at HUF 508 bln in the 2024 budget, down from HUF 580 bln in the 2023 budget.

The budget targets HUF 3.881 tln of spending on European Union-funded developments.

Expenditures on debt servicing are targeted at HUF 3.145 tln in the 2024 budget, up from HUF 2.541 tln in the 2023 budget.

A "Defense Budget" to Counter Instability

In the reasoning attached to the legislation, the government called the 2024 budget a "defense budget" that addresses the challenges posed by "the negative consequences of the unstable global economic environment, Brussels' failed sanctions policy, and the prolonged war".

The government pointed to the need for a budget that "ensures the physical and economic security of the country, protects Hungarian families, workplaces and pensions, and maintains a utility price protection system without peer in Europe".

Addressing lawmakers ahead of the vote, Fiscal Council chairman Árpád Kovács said the finance minister had signaled in a letter the government's intention to initiate an amendment to the central bank act after consultations with the National Bank of Hungary (MNB). The draft amendment, on which the government will consult with the ECB, would cover any difference between the central bank's net assets and statutory share capital with future profits, thus government recapitalization would not be required and the 2024 deficit target would not be put at risk, he added.

At present, Hungarian legislation requires the government to cover any difference between the central bank's net assets and statutory share capital in equal payments over five years.

In a report published earlier in the week, MNB had estimated its mandatory capitalization following expected losses due to economic stimulus, and measures to bring down inflation posed a risk to next year's budget equivalent to 0.4%-0.5% of GDP.

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