Hungary repays IMF loan

Hungary repaid its outstanding SDR 1.9 billion (EUR 2.15 bn) debt to the International Monetary Fund (IMF) on August 12, the country’s National Economy Ministry has announced on Monday. The governing party welcomes the move while the opposition calls it a costly communication bluff.

The payment was made in US dollar, euro and British pound at the request of the IMF, the financial website portfolio.hu reports. The Government Debt Management Agency (ÁKK) has transferred USD 1.1 bn, EUR 500 m and GBP 260 m to the Fund from the part of the loan that had been drawn from the IMF but had not been used, from the USD bond issuance in early February and proceeds from the sale of the Premium Hungarian Euro Government Bond (PEMAK) therefore no extra bond issuance was necessary.

Of this sum EUR 1.8 bn were due in 2013, EUR 300 m in the first quarter 2014 and a marginal tranche in the third quarter of 2014. The earlier bond issuances and the government’s reserves are sufficient to clear the outstanding repayment obligation ahead of schedule. The National Economy Ministry said some HUF 3.5 bn debt service costs could be saved on the repayment.

The ruling Fidesz party’s communiqué claims the repayment is the merit of the performance of the Hungarian people.  However, the biggest opposition party, the Socialists, point out that the repayment is a costly communication bluff as the government took out more expensive loans (from bond issuance) to pay back the low-cost IMF loan. Repayment according to schedule could have saved the country over HUF 10 bn. The right-wing opposition party Jobbik also stresses that the repayment deal is unfavorable for the country as the Orbán government replaced a low-interest IMF loan with a higher-interest bond issuance.