Economy
INTERVIEW - Hungary FinMin sees BudAir sale help curb budget gap
Veres said the public sector surplus could be larger than the previously projected HUF 100 billion and that a substantial part of the revenues from the sale of Budapest Airport might be used to reduce the deficit, not only this year but also in 2006.
“Most of it will come from operational spending, which requires a permanent structural transformation, cannot be done by shifting spending from one month to the other or by hidden financing of background institutions," Veres said.
He said the rest of the cuts would come from cutting back on nationally funded investment projects, as next year Hungary would receive much more European Union funds than in 2005.
The main budget revenue and spending data, as well as details of the spending cuts, will be released at the end of September before the draft budget is submitted to Parliament, the minister said.
Analysts said in 2006 spending needs to be cut by HUF 500 billion, while the central bank said in its August Inflation Report that a reduction of HUF 750-800 billion was necessary.
Veres also said that after three years of deficit overshoots, this year Hungary will meet its cash-flow based budget deficit target of HUF 1,023 billion.
He said that while the full-year deficit goal will be overshot in September, the surplus in December was likely to be larger than the HUF 100 billion projected earlier.
He confirmed his earlier statement that some of the proceeds from the sale of Budapest Airport would also reduce the cash-flow based deficit.
He also said that value added tax payments into the budget related to the financing of motorway construction would reach more than HUF 50 billion towards the end of the year. This VAT needs to be refunded only 45 days later, in January.
These two items, however, would not affect the EU accounting based deficit, he added.
State Privatisation Holding (ÁPV) received bids on Budapest Airport between HUF 202 billion and HUF 390 billion. The top bid greatly exceeded expectations. The deadline for final bids is 2 November. Veres said a significant part of the revenues from the sell-off might be used to reduce the deficit, not only this year but also in 2006.
“There is no such rule in Hungary that we have to spend all the money which comes in at Christmas by New Year's," he said, adding that depending on the bids the revenues which can be used to reduce the deficit can be much bigger than HUF 100 billion.
HUF 250 bn spending cuts, proceeds from BudAir sell-off.
In June the government said it planned to cut spending by HUF 200-250 billion in 2006 to compensate for the revenue shortfall to be caused by tax cuts. Now Veres said the reduction, coming mostly from cuts in ministries' operational costs, would be HUF 200-300 billion. “Most of it will come from operational spending, which requires a permanent structural transformation, cannot be done by shifting spending from one month to the other or by hidden financing of background institutions," Veres said.
He said the rest of the cuts would come from cutting back on nationally funded investment projects, as next year Hungary would receive much more European Union funds than in 2005.
The main budget revenue and spending data, as well as details of the spending cuts, will be released at the end of September before the draft budget is submitted to Parliament, the minister said.
Analysts said in 2006 spending needs to be cut by HUF 500 billion, while the central bank said in its August Inflation Report that a reduction of HUF 750-800 billion was necessary.
Veres also said that after three years of deficit overshoots, this year Hungary will meet its cash-flow based budget deficit target of HUF 1,023 billion.
He said that while the full-year deficit goal will be overshot in September, the surplus in December was likely to be larger than the HUF 100 billion projected earlier.
He confirmed his earlier statement that some of the proceeds from the sale of Budapest Airport would also reduce the cash-flow based deficit.
He also said that value added tax payments into the budget related to the financing of motorway construction would reach more than HUF 50 billion towards the end of the year. This VAT needs to be refunded only 45 days later, in January.
These two items, however, would not affect the EU accounting based deficit, he added.
State Privatisation Holding (ÁPV) received bids on Budapest Airport between HUF 202 billion and HUF 390 billion. The top bid greatly exceeded expectations. The deadline for final bids is 2 November. Veres said a significant part of the revenues from the sell-off might be used to reduce the deficit, not only this year but also in 2006.
“There is no such rule in Hungary that we have to spend all the money which comes in at Christmas by New Year's," he said, adding that depending on the bids the revenues which can be used to reduce the deficit can be much bigger than HUF 100 billion.
