Economy
Hungary to take out EIB loan instead of bond issuance to finance motorway building - paper
The Economy Ministry and the Finance Ministry have already started working on the project.
Motorway firm ÁAK was going to issue the euro bonds, to which another EUR 400 million were to be added at a later date, to keep the spending off budget.
But when Finance Minister János Veres announced in late June that the cost of motorway building would be recognized in the budget, adding 0.6 percentage point of GDP to the 2006 deficit of 8.0%, the more costly bond issue became pointless, the paper said.
Taking out a loan from EIB appears to be a better solution since it is already providing EUR 320 million for the motorway programme, the paper said without disclosing its sources.
Economy Minister János Kóka told a press conference in mid-May that the government would add EUR 400 million to this year's motorway budget of EUR 1.2 + 0.32 bn, but then they were yet to decide whether this would be bond issuance or borrowing.
He said last month that the government would re-examine the planned bond issues and that it maintained plans to partially privatise and list the ÁAK so as to take bond issuance off budget.
According to the latest news, this plan was not taken off the agenda even though the bond issuance may be scrapped. The reason is that the budget badly needs the money from the stock exchange listing (HUF 30 bn according to plans). The problem is that experts consider the company valueless and the market should be considerably reshaped in order to spark investors' interest for ÁAK.
Hungary needs to submit a revised and credible Convergence Programme by 1 September to the European Commission to show how it will reduce the public sector deficit to 3% of GDP necessary for euro adoption, and transparent accounting of items like motorways is a key concern for the European Union.
Motorway firm ÁAK was going to issue the euro bonds, to which another EUR 400 million were to be added at a later date, to keep the spending off budget.
But when Finance Minister János Veres announced in late June that the cost of motorway building would be recognized in the budget, adding 0.6 percentage point of GDP to the 2006 deficit of 8.0%, the more costly bond issue became pointless, the paper said.
Taking out a loan from EIB appears to be a better solution since it is already providing EUR 320 million for the motorway programme, the paper said without disclosing its sources.
Economy Minister János Kóka told a press conference in mid-May that the government would add EUR 400 million to this year's motorway budget of EUR 1.2 + 0.32 bn, but then they were yet to decide whether this would be bond issuance or borrowing.
He said last month that the government would re-examine the planned bond issues and that it maintained plans to partially privatise and list the ÁAK so as to take bond issuance off budget.
According to the latest news, this plan was not taken off the agenda even though the bond issuance may be scrapped. The reason is that the budget badly needs the money from the stock exchange listing (HUF 30 bn according to plans). The problem is that experts consider the company valueless and the market should be considerably reshaped in order to spark investors' interest for ÁAK.
Hungary needs to submit a revised and credible Convergence Programme by 1 September to the European Commission to show how it will reduce the public sector deficit to 3% of GDP necessary for euro adoption, and transparent accounting of items like motorways is a key concern for the European Union.
