Hungary needs a credit line from International Monetary Fund (IMF) and will get it, but the government currently opposes the conditions for the foreign aid, Hungarian Prime Minister Viktor Orban said, according to Bloomberg.
“Safety is very important to us and therefore we need an agreement with the IMF. I believe that it is necessary, and it will happen. We will reach an agreement, but not on this basis,” he said.
Orban rejected on Thursday a series of tough conditions which he said that would be imposed by the IMF, only a day after he said that Hungary can reach an agreement with the international institution in the fall. The forint has recorded the largest decline this year, but subsequently recovered some of the losses. Hungarian Cabinet in the next 7 to 10 days will prepare an alternate plan for negotiations with the IMF, Orban said.
Hungary revised its attitude vis-a-vis IMF several times after Orban took power in 2010, with commitments to abandon austerity measures. Since “unorthodox” economic policies of the Prime Minister have pushed the country into recession and the country’s rating in the category of “junk”, the Prime Minister was forced to formally request in November 2011, help from the IMF.
The forint has lost 1.7% Thursday, on the day the European Central Bank (ECB) chief, Mario Draghi, announced a plan to buy government bonds of crisis-stricken eurozone countries.
“It means that negotiations for an aid program may be delayed or even suspended. It remains only a small chance they could be reactivated,” said Daniel Hewitt, an economist at Barclays.
The daily Magyar Nemzet presented a list of demands from IMF, which Orban subsequently confirmed through a video posted on Facebook. The paper obtained the list after it was presented at a meeting of the ruling party Fidesz. The list of requirements from EU/IMF, of at least 30 points, is part of a recent European Commission (EC) report, said the Premier.
According to Magyar Nemzet, the IMF expects from the Hungarian government to take the following measures: lower pensions and family allowance, raising the retirement age and personal income tax, privatization, reducing bureaucracy, a general tax based on the fair value of real estate transactions, reducing costs for local authorities, eliminating the banking tax and more funds for banks.
Hungary began in July talks with the IMF and EC for an financial agreement estimated at around €15 billion. Budapest wants to have a preventive agreement. Hungarian state was saved from financial collapse in 2008 with a package of €20 billion from IMF, EU and World Bank.
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