Hungary has transferred the last remaining tranche, €1.5 billion loan to the European Union, part of the €20 billion taken out by pevious socialist-liberal government during the economic crisis.
Due to the economic crisis and the government's misguided policies, Hungary was on the brink of insolvency and had to turn to the IMF and EU and the World Bank for a lifeline in 2008, National Economy Minister Mihály Varga announced at a press conference. Hungary received a €20 billion aid deal from the IMF and the European Union to avoid bankruptcy in October 2008. The loan was used to finance maturing debt and the budget deficit and in part it was used to buy back 25% of MOL shares from Russian Surgutneftegas, analysts said.
The government paid back the entire €8.8 billion tranche to the IMF in the summer of 2013, ahead of its maturity.
Hungary's state debt to GDP was 83.7% and the budget deficit was 7% in 2010, when the new government took office, Varga said. The share of foreing investors in debt financing was also very unfavourable, at 70% of the total and the foreign-exchange debt was 50%.
In the last six years, Hungary has managed to keep its budget deficit below 3% for four consecutive years and to bring down its state debt to around 75%.The country's financing ability has improved remarkably thanks to the low interest rate environment and renewed investors confidence. The state debt manager ÁKK has been able to finance debt at low rates from the market relying more and more on the savings of retail investors. Households have been snapping up government bonds, reducing the reliance on foreign-investment.
In a recent report, the IMF has acknowledged the country's economic successes saying Hungary is now less vulnerable to external shocks, though it gave warning that financing needs remain high and an abrupt sharp deterioration in global or emerging market risk perception could lead to capital outflows.
