Hungary hopes to receive 15-20 billion Euros from the EU-IMF

The government in Budapest hopes to raise 15-20 billion Euros through a 3-4 year loan agreement with the International Monetary Fund and the European Union, which could be used as a solution of last resort, if the country's economy stagnates.

The IMF-EU team of experts was set to arrive yesterday in Budapest, where it would hold informal discussions with Hungarian officials, as a prelude to the official negotiations, which will begin next year.

State secretary Mihaly Varga said, as quoted by the origo.hu portal, that the authorities in Budapest are hoping to complete the talks with the international creditors by the end of January 2012.

"Considering the repayment schedule, we can picture a 3-4 year period, and an amount of 15-20 billion Euros", said Mihaly Varga, who added, however, that the final amount of the package would depend on the evolution of the bonds market,s which are currently uncertain. The final amount could be lower if Hungary were to decide that it needs a safety belt just for next year.

A package of 15-20 billion Euros would be similar to the previous support agreement which saved Hungary from collapse, in 2008. Still, Mihaly Varga said that this time Hungary is not looking for a loan.

The official in Budapesta said: "Hungary does not need a foreign loan. At the end of November we have repaid 2 billion Euros of the EU-IMF loan signed in 2008, and the following significant repayment, of approximately 960 million Euros, is scheduled for the end of Q1 2012. This means that until the end of March, the country is safe".

In 2012, Hungary must rollover bonds coming due, worth 1,820 billion forints, and bonds denominated in foreign currencies of 1,370 billion forints, including 3.34 billion Euros from the previous financing agreement with the IMF.

At the end of November, Zoltán Cséfalvay, secretary of state in the Hungarian Ministry of the Economy, said that Hungary intends to conclude a new agreement with the IMF to avoid the country's downgrade. Hungary's plan did not fully succeed, however, as Moody's downgraded Hungary to "junk", which means not recommended for investments.