Hungary to Narrow Budget Deficit More Than Planned, Varga Says
(Bloomberg) -- Hungary plans to narrow its budget shortfall more than planned next year, Finance Minister Mihaly Varga said, in the latest sign of a fiscal pivot after record pre-election spending.
The government plans to reduce the deficit below its current 2022 target of 5.9% of gross domestic product, Varga said in an interview on Tuesday, without saying what the new goal would be.
“Our goal is for the the budget to get back on the track it was on before the pandemic as soon as possible,” Varga said.
The cabinet may meet its goal of a 7.5% of GDP gap this year, which hinges on exchange rate fluctuations and municipal spending. The plans for this year and next still far exceed the European Union’s prescribed level for deficits of 3% of output, a goal that few members are close to in the aftermath of pandemic-driven recessions and stimulus packages.
New economic forecasts will be published later this month, Varga said. His comments followed the creation of 350 billion forint ($1.1 billion) in additional budget reserves, financed by a cap on ministry spending and the delay of some investments.
Prime Minister Viktor Orban also scrapped a plan on Monday to complete the $5 billion purchase of Budapest Airport before the April elections, citing budget concerns.
While central bank Governor Gyorgy Matolcsy has flagged elevated spending levels and deteriorating public finances as potentially risking financial stability, Varga said Hungary’s budget financing continued to be stable. The government can avoid deeper expenditure cuts, even as potential monetary tightening from the Federal Reserve may roil emerging markets, he said.
“We are prepared in case we have a more vulnerable period ahead of us, but our budget financing is solid,” Varga said by phone.
The recently announced moves are nonetheless a pivot toward eventual budget consolidation after more than $7.5 billion in spending that is planned through election day. That includes nearly $2 billion in family tax rebates and increases in pensions.
Hungary sold 1 billion yuan of 3-year green panda bonds on Tuesday, the first such sovereign issuance, which Varga said would allow Hungary to maintain a foothold in Chinese financial markets and diversify holders of its debt.
It follows the sale of euro- and U.S. dollar-denominated debt earlier this year and comes before a planned Japanese yen-denominated issue in January, according to Varga.
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