Hungary pledges to stick to 2010-2011 budget deficit aims, won’t seek new loans from IMF, EU

Hungary won’t seek to renew IMF, EU loans

BUDAPEST, Hungary — Hungary will not seek any more loans from the International Monetary Fund or the European Union and will be able to meet its financing needs by selling bonds to international and domestic investors, Economics Minister Gyorgy Matolcsy said Wednesday.

Matolcsy also said the government is committed to a state budget deficit target of 3.8 percent of GDP this year, and of below 3 percent in 2011.

The IMF, the EU and the World Bank gave Hungary a bailout of euro20 billion ($26 billion) in late 2008 to help the country avoid defaulting on its debts. The standby deals end in October and November.

Hungary has drawn some euro14.2 billion of the available amount, but nothing this year, Matolcsy said.

“These are important decisions … and I think that we have now started going in the right direction,” Matolcsy said after the weekly government Cabinet meeting.

Matolcsy said certain conditions, including higher economic growth and higher budget revenues stemming partly from a special tax on banks, need to be fulfilled to meet the deficit targets.

The bank tax is expected to generate 200 billion forints ($888 million, euro697 million) this year and next.

Matolcsy also said the government would initiate structural reforms to reduce bureaucracy and state spending, a further source of savings.

The seemingly straightforward pledge to meet the deficit targets agreed to with the IMF by the previous, Socialist government marked a fundamental adjustment for the current center-right administration led by Prime Minister Viktor Orban which took office over three months ago and has a two-thirds majority in parliament.

“This is a sharp change in rhetoric … as the government becomes increasingly aware of the adverse market implications from loose fiscal commitments and non-transparent economic policies,” said 4Cast analyst Gabor Ambrus in London.