On 15 July, Minister for National Economy Mihály Varga informed IMF Director Reza Moghadam in a letter that Hungary intends to fully repay the IMF loan provided for the country in 2008 ahead of schedule, by 12 August 2013. This option is only open for countries with sufficient fiscal reserves, a stable budgetary policy and positive investor sentiment indicators.

As a result of the strenuous efforts of the past three years, in Hungary the aforementioned factors are facilitating an opportunity for the economy to shed the burden posed by the IMF loan prior to the reimbursement date.

The favourable market environment and investor confidence in Hungary have resulted in the most auspicious government bond yields and the best 5-year CDS premium (an indicator that reflects investor sentiment) in years.  Consequently, Hungary has managed to accumulate a significant stock of reserves and achieve favourable financing conditions. As there are sufficient resources available to cover the early repayment, the Government has decided to initiate the final repayment of the outstanding debt.

The State of Hungary (excluding the National Bank of Hungary) has drawn EUR 7.5bn from the loan provided by the IMF. The current respective amount of principal debt is EUR 2.2bn and the last large instalment of that would be due in March 2014. By fully repaying the IMF loan ahead of time, the Government is taking a big step towards financing its debts from the markets – the share of which has been increasing steadily. This measure will also cut interest payments and thus ease the burden on the Budget. Foreign currency reserves will remain at a secure level despite the early repayment.

(Ministry for National Economy)