The Government has submitted an amendment to the 2013 Budget Act to Parliament which contains certain measures to ensure that Hungary exits the Excessive Deficit Procedure.

With this, the Government aims to lay down fiscal cornerstones for 2013 such as HUF 15 325bn for headline revenues and HUF 16 205bn for headline expenditures with a deficit figure of HUF 879.8bn.

In the summary for the rationale leading up to the proposal, available at the Parliament’s website, the Government emphasizes that the Bill contains measures proposed to be introduced with the aim of Hungary’s exiting the EDP and which fall under the scope of competency of the National Assembly and require amendment of the Budget, address the concerns of law-enforcers and include the fiscal effects of measures the Government has already implemented.

The Government prescribes the payment of HUF 1.5bn by the Hungarian Financial Supervisory Authority, a body with its own budget, from which amount the first instalment of HUF 500 million is to be paid until 30 June, while the remainder shall be paid in equal monthly instalments.

Certain so-called “constitutional titles”, independent of Government control, also contribute to the improvement of the fiscal balance, and thus until 30 June 2013 fund reserves of varying amounts shall be set side. The amounts to be earmarked, for example within the Parliament Fund (including, among others, titles for the Equal Treatment Authority or the Hungarian National Authority for Data Protection and Freedom of Information), the Office of the President of Hungary Fund or the Constitutional Court Fund, total some HUF 500 million, HUF 26.3 million and 35.5 million, respectively. The two largest amounts to be frozen are appropriations for judicial courts (HUF 1.5bn) and public prosecutor’s offices (HUF 732.9 million).

Pursuant to the amendment, the National Asset Management Agency (MNV) would not be entitled to take out a loan or act as a guarantor, but the MNV would be authorized to act on behalf of the Government of Hungary with regard to the issuance of securities issued by Hungary which would be guaranteed by financial instruments that constitute a state asset.

The Act on Motion Pictures stipulates that at least 80 percent of gambling tax revenues from the Hatoslottó lottery shall finance the activities of the Hungarian National Film Fund. In order to support the Hungarian film industry, the proposal – similarly to the 2012 regulation – provides a higher amount of funding than stipulated by the relevant regulation.

The proposal orders that savings resulting from the mandatory retirement of public sector employees shall be paid to the central budget. In addition, with regard to debt assumption, this proposal harmonizes with the regulation on the taking over by central budgetary institutions of tasks carried out by providers of in-patient and related services and by state-owned business organizations and of their related procedural activities.

In the summary of rationale regarding the measures required for the termination of the EDP, the Government emphasizes that it disagrees with the European Commission’s macro-economic prognosis on Hungary published on 3 May 2013, and it is of the opinion that the 2013 Budget would certainly be capable of meeting the 2.7 percent fiscal target even without the adjustments required by the Commission.

The measures do not affect funding and subsidies earmarked for families and private individuals, but they influence the operational expenditures of the state administration. The cost-cutting measures – from the aspect of the amounts saved –primarily effect institutions that are under Government management, but also proportionately impact the institutional expenditures of organizations which are independent of Government control.

(Ministry for National Economy)