Hungary could secure a EUR 15 billion bailout from the International Monetary Fund (IMF) and EU by October, the government’s chief negotiator, Mihály Varga, said last Friday. All that remains is to “find time on the calendar and book flights”, he said.
Varga’s upbeat assessment came as the European Central Bank approved proposed legislative amendments to laws it saw as threatening the independence of the Hungarian National Bank.
The European Central Bank viewed the proposals, whose passage by the ruling Fidesz party should be a formality, as “an indication that the Hungarian government is now ready to respect” the independence of its central bank.
Two days earlier, IMF president Christine Lagarde wrote to the cabinet saying: “Once the proposed amendments are adopted, the Fund will be ready to enter into negotiations on a joint IMF/EU program together with our European partners.”
With Hungary’s sovereign debt rated as “junk” and the markets demanding interest rates of around nine per cent, an IMF deal is crucial because the government faces the imminent need to refinance large chunks of foreign debt. The official line is that the IMF loan would be nothing but a “precautionary” measure.
Any loan deal is likely to come with strings attached, just as for Hungary’s 2008 bailout of EUR 20 billion. “In our view, Hungary will have to accept a full conditionality stand-by arrangement,” analysts at Barclays Capital told state news agency MTI.
Varga said: “We are open to listening to the proposals of our partners on the type of the credit line.”
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