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IMF credit deal less probable than ever

December 22nd, 2012

Two pro-government commentators disagree over the desirability of a credit-line agreement with the International Monetary Fund.

In Magyar Nemzet, Tamás Nánási welcomes an announcement by the Treasury, according to which “Hungary does not reckon with an agreement with the IMF.” Hungarian sovereign bonds sell well and as a result, Nánási continues, “we do not have to subordinate our economic policy to the expectations of the IMF.” He cautions, however, that the yields the Hungarian taxpayers have to pay on those bonds are still high, and suggests that the government should try and achieve better issuing conditions. Whether that endeavour will be successful, Nánási opines, will depend on the duration of the relative calm now prevailing in international finances.

In Magyar Hírlap, Csaba Szajlai believes financing public debt through IMF credits , even if yields have somewhat decreased over the past few months. He warns, however, that in the long run Hungary cannot be successful if GDP growth remains feeble. He approves the three main targets of the government’s economic policy – fiscal stability, debt reduction and job creation, but remarks that none of them are attainable without economic growth. And since domestic savings are insufficient, growth must necessarily be financed from abroad. Szajlai suggests that the IMF-agreement would be a necessary but by itself insufficient precondition for Hungary to regain her credibility in the eyes of international investors. And since everything seems to indicate that there will be no IMF deal, we should at least reach an agreement with international capital,” he concludes.

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