Hungarian gov't bought back a large amount of government bonds on the last day of 2024

On 19 December, the ÁKK had already completed a larger transaction of HUF 615 billion, amounting to around 0.77% of GDP, which was already aimed at reducing the amount of outstanding public debt issued by the Hungarian government and the debt ratio as it is returned to the issuer towards the end of the year.

On the last day of the year 2024, with a more accurate knowledge of the budgetary process and the year-end forint exchange rate needed to calculate the foreign currency debt, the Ministry of Finance could decide that

another significant amount of debt, HUF 462 billion, had to be redeemed by the ÁKK, and that the liquid financial reserves of the budget had to be further depleted by this amount.

The New Year's Eve transaction represents 0.58% of last year's estimated GDP, and together with the transaction two weeks earlier, this means that the government reduced the size of its debt issuance by 1.35% of GDP, or HUF 1,077 billion. It has also depleted the liquid reserves of the budget by a very significant amount.

According to the statement issued by the MNB on the same day,

the central bank held HUF 2,664 billion of government bonds with a nominal value of HUF 2,664 billion before the transaction.

Although the nominal and market values differ and we do not know which of the HUF 462 billion reported by the PM is which, the information provided by the central bank suggests that roughly HUF 2,100 billion of government securities may have remained on the central bank's balance sheet after the New Year's Eve transaction.

The central bank also stated that "government securities sales transactions at market prices, which are carried out directly by the parties concerned, do not jeopardise the achievement of the MNB's objectives of maintaining price and financial stability." Finally, the central bank stressed in the statement that

it still does not plan to sell government securities remaining on its balance sheet in the market following the individual transactions at the end of 2024.

The Ministry of Finance stressed that "the government remains committed to reducing public debt" and that the buy-back will

strengthen Hungary's risk perception and reduce its financial vulnerability

Cover photo (for illustration purposes only): Getty Images