Economy
Hungary withholds publication of IMF Article IV Staff Report
The IMF Board discussed the economic policy report on Hungary from last November on 18 January. The Article IV document had been sent to the government even before that meeting took place. The report is usually published on the day of the meeting or soon after. But we need to note that the recipient country’s authorities first need to consent to the release of the report. According to our information, the government used its right not to green-light it this time.
What could be the expectations?
The IMF’s document is important for several reasons, primarily because it can clarify the Fund’s view on a number of economic policy issues before formal talks on a credit line would start.
According to previous reports, the IMF will want the government to reinforce the Fiscal Council; ensure further budget deficit reduction mostly via spending side measures; abandon haphazard economic policy measures; considerably reduce crisis taxes and eventually phase them out; reform the system of social transfer and reorganise public transport companies.According to a media report from last week, the Fund may also request Hungary to amend the flat-rate personal income tax system too, an emblematic measure of the Orbán-cabinet.Gov’t may be working on a strategy
Portfolio.hu learned from the IMF that the ball is now in the government’s court regarding the publication of the staff report. It was the local authorities that refused to give its consent to releasing it, so the Fund cannot do anything but “wait for an answer", the source said.
It is “entirely up to them" (i.e. the cabinet) when the staff report will be published.
There is no information as to why the government chose to withhold the report. But it possibly does not agree with the economic policy statements and potential political/institutional recommendations the IMF staff made. And if it gives the go-ahead for the publication of the staff report it may be interpreted as an indirect agreement to these proposals, which could limit its manoeuvring room in the bailout talks.
We also find it possible that parallel with the release of the IMF staff report the government will publish its own views on the most critical points addressed in the report and that this document was still incomplete last week which was rather dense in terms of crucial events. This “minority report" could serve as the foundation for the cabinet’s stance and strategy in the IMF/EU credit negotiations.
The battle a year ago
In the staff report for the 2010 Article IV consultation and proposal for post-program monitory released in early February 2011, the IMF harshly criticised the government’s economic policy measures. The Economy Ministry reacted in an even more acerbic statement. It can obviously not allow itself to slam the IMF for its views this time, given that the country is now seeking money from the international lender.
What could be the expectations?
The IMF’s document is important for several reasons, primarily because it can clarify the Fund’s view on a number of economic policy issues before formal talks on a credit line would start.
According to previous reports, the IMF will want the government to reinforce the Fiscal Council; ensure further budget deficit reduction mostly via spending side measures; abandon haphazard economic policy measures; considerably reduce crisis taxes and eventually phase them out; reform the system of social transfer and reorganise public transport companies.According to a media report from last week, the Fund may also request Hungary to amend the flat-rate personal income tax system too, an emblematic measure of the Orbán-cabinet.Gov’t may be working on a strategy
Portfolio.hu learned from the IMF that the ball is now in the government’s court regarding the publication of the staff report. It was the local authorities that refused to give its consent to releasing it, so the Fund cannot do anything but “wait for an answer", the source said.
It is “entirely up to them" (i.e. the cabinet) when the staff report will be published.
There is no information as to why the government chose to withhold the report. But it possibly does not agree with the economic policy statements and potential political/institutional recommendations the IMF staff made. And if it gives the go-ahead for the publication of the staff report it may be interpreted as an indirect agreement to these proposals, which could limit its manoeuvring room in the bailout talks.
We also find it possible that parallel with the release of the IMF staff report the government will publish its own views on the most critical points addressed in the report and that this document was still incomplete last week which was rather dense in terms of crucial events. This “minority report" could serve as the foundation for the cabinet’s stance and strategy in the IMF/EU credit negotiations.
The battle a year ago
In the staff report for the 2010 Article IV consultation and proposal for post-program monitory released in early February 2011, the IMF harshly criticised the government’s economic policy measures. The Economy Ministry reacted in an even more acerbic statement. It can obviously not allow itself to slam the IMF for its views this time, given that the country is now seeking money from the international lender.
