July 16th, 2012

Hungary will tap IMF loan in 2013 if market financing dries up, says Varga

piggy bank

If Hungary cannot find sufficient market financing next year it will draw on the loan it is seeking from the International Monetary Fund (IMF), Mihaly Varga, the country’s chief negotiator in talks with the IMF, said late on Sunday. An IMF delegation will arrive in Hungary on Tuesday, and talks will commence shortly after on a stand-by agreement (SBA) which is estimated at around 15 billion euros.

Varga told Hir Tv’s Versus programme that Hungary needed 5-6 billion euros to repay its maturing IMF debt, among other items. He said it was difficult to predict now whether market sources would be found to meet this need, which is why Hungary is seeking a stand-by loan which is precautionary.

“If the market sources are found, then we don’t need the new loan, if not, we might have to draw on the credit line; this is the safety net scenario,” he said.

Varga said topics on the agenda may include the fund’s call for a property or wealth tax as well as the banking tax and the new financial transactions tax.

Government officials earlier ruled out introducing property and wealth taxes and also said the financial transactions tax was here to stay.

He said Hungary wants to introduce a tax system where consumption is taxed, for example by raising VAT, while tax on labour is cut. This policy proposal will be put to the IMF-EU delegation, he said, adding, however, that the government had no plans for a new tax at the moment.

He said Hungary’s position on the transactions tax and central bank’s independence regarding its payment was that the central bank should decide itself how it should pay the tax and whether it wants to transfer the burden to its clients.

“We hope to convince the IMF that if every banking partner must pay the tax, why shouldn’t the central bank pay it, too?” said Varga.

  • BB

    Oh good – more potential VAT rises. Clearly 27% isn’t enough.
    That should encourage people to make sure they add in their ÁFA to their prices…

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