The government is concerned over the fast weakening of the forint and will work with the central bank on finding way to ease the problem, Prime Minister Ferenc Gyurcsany said after meeting central bank president Andras Simor on Monday.
The central bank must know the government’s plans for reconfiguring the tax and welfare system, Gyurcsany said.
Finance Minister Janos Veres, who attended the meeting, said talks are under way with the European Investment Bank (EIB) on a loan for developments.
Hungary’s budget deficit of 700 billion forint (EUR 3.01bn) will require 3 billion euros to finance, but it is not possible to borrow from the EIB for this purpose, Veres said.
London-based analysts said on Monday that a great fluctuation in the forint’s rate would normally cause inflation to rise, but there are other macroeconomic factors which are expected to offset the inflationary effect.
Analysts at Merrill Lynch projected that Hungary’s inflation would “head in the direction of 1.5 percent” and the central bank would cut its base rate to 5.5 percent by the end of 2009.
The forint was trading close to all-time lows of 296-298 per euro on Monday.