Hungary’s Government Debt Management Agency (ÁKK) has large enough buffers to cover the budget deficit accumulated due to lagging EU fund payments, CEO György Barcza told Reuters. He added that even the weak forint will not make it difficult to reach the 73.2% of GDP debt target by the end of the year.
Hungary has around HUF 730 billion forints billion) worth of buffers from debt issuance to finance a budget deficit which is widening due to a lag in payments of EU development funds, ÁKK Chief Executive György Barcza told Reuters on Monday.
He said the figure included 1 billion euros in proceeds from a euro bond issued last week. The ÁKK will decide only later this year on how to use this money.
A dispute between Hungary and the European Commission about some EU-funded projects may not be settled this year which could delay payments from the European Union, a Commission source said last month.
According Finance Ministry data, in the first eight months the cash-flow deficit widened to HUF 1.646 trillion, exceeding the full-year target of HUF 1.361 trillion in the 2018 budget largely due to a delay in payments from Brussels.
Barcza said the ÁKK was running about 200 billion forints above plan with forint-denominated government bond issues, and 200 billion ahead with issues of government securities to retail customers. This, together with the proceeds from the euro bond amounts to a total of 730 billion forints, he said.
This (EU funds' lag) has been a recurring issue for years. The scale and amount changes, as there was a pre-financing gap last year and the year before, but this year it could be bigger
, Barcza said in an interview.
He said the ÁKK was not planning to exceed its 20% target for the proportion of debt denominated in foreign currency within total debt. At the end of August it stood at 19.5%.
Barcza said the end-year public debt target of 73.2% of economic output was reachable even with the current weaker forint levels.
Barcza said Hungary can issue a further 2 billion renminbi worth of bonds in the Chinese market under a current programme that runs until the end of June 2019, and the ÁKK would like to use this possibility. Last year Hungary issued 1 billion renminbi worth of three-year "Panda" bonds.
"Slowly but continuously, we can establish our presence there," Barcza said. Front page photo by MTI / János Marjai