IMF agreement delayed again
November 21st, 2012A leading pro-government columnist says that while Hungary does not need an IMF loan, negotiations should continue next year.
The IMF found the latest Hungarian measures to reduce next year’s deficit insufficiently sustainable. Minister of the Economy György Matolcsy unveiled his third austerity package in two months on Monday, October 29th. The new utility tax will extend to all types of utility infrastructure except households (the expected revenue is 30 bn HUF), the levy on Szerencsejáték Rt, the public company with a monopoly on games of chance will be raised (10 bn HUF) as well as the tax on the profit of utility companies (40 bn HUF). The new package is to reduce the deficit to 2.7 per cent of GDP for 2013. For the previous austerity packages and reactions from IMF and EU representatives see BudaPost October 29, 19, 9 and 8.
Anna Szabó explains in her Magyar Nemzet editorial that when the government announced its intention to resume negotiations with the IMF a year ago, there were concerns that the global economy would plunge into yet another recession, with investors buying commodities instead of securities. Under these constraints, Hungary needed to play it safe as she had to pay back “the very short term 14,2 bn euros worth IMF loans negotiated by Ferenc Gyurcsány and Gordon Bajnai.” She writes that “it is unquestionable that under the speculative pressure of those days,” Hungary had to turn to the IMF. During the last year, she continues, it was the global economic climate which changed, not the respective positions of the IMF or the Hungarian government. With a balanced budget and reduced sovereign debt “there was no need to give in to the IMF ultimatum as Gyurcsány did in 2008.” The IMF would never have accepted such measures as a levy on bank transactions, an extension of the tax on banks and the government taking over the debt of municipalities, she claims. Yet, if the U.S. cannot resolve the “fiscal cliff” crisis, another deep recession may follow. This is why Hungary “must not terminate” negotiations with the IMF, Szabó concludes.