Details of the negotiations between the IMF and the Hungarian government came to light today, as they were made public by the weekly Figyelo quoted by Portfolio.hu. Thus, on 18 January, during the Board of Directors meeting, the conditions that Hungary is expected to meet will be presented to the IMF. According to the report, the IMF will impose the following conditions for the signing of a Stand-by Agreement:
– Restoration of central bank independence.
– Independence from the Hungarian Government of the Fiscal Council.
– A a more stringent fiscal policy, especially in relation to expenditures.
– Significant reduction of “crisis” taxes and eventually giving up on them.
– Stop the ad-hoc implementation of economic policy measures.
– Implementation of reform measures previously announced.
– Restoration of the social security system.
– Restructuring of public transport companies.
– Introduction of the “personal bankruptcy” institution.
The negotiations for a credit line of up to $25 billion between Hungary, IMF and European Union broke off last month because of worries about the independence of the central bank. Hungary has pledged to discuss the conditions for a loan from the International Monetary Fund (IMF) in an attempt to speed up negotiations after the forint fell to a record low and the attempt to sell bonds ended in failure. The government is ready to begin negotiations for a stand-by accord with IMF and the European Union and wants an agreement “as soon as possible”, said Tamas Fellegi, Hungary’s chief negotiator with the IMF. The government hopes to get the precautionary loan for use in case market conditions require it.
However, rating agency Fitch revised on Friday, down the country rating of Hungary from “BBB-“, the lowest step for the investment recommended category, to “BB +”, “junk”. Fitch is the last of the three largest credit rating agencies that downgraded Hungary rating because of problems in securing debt financing, the crisis in Europe and weaker growth prospects. Standard & Poor’s and Moody’s have already taken similar decisions.
