Hungarian central bank building in Budapest: Hungary's program aims to strengthen the financial sector. (photo: Laszlo Balogh/Reuters)
GLOBAL ECONOMIC CRISIS
Subject to agreement by the IMF's Management and Executive Board, the IMF is ready to lend Hungary $15.7 billion (12.5 billion euro) under a 17-month Stand-By Arrangement. The proposed package could be reviewed by the Board under the Fund's emergency procedures in early November, the IMF said in a press statement.
The EU stands ready to provide a loan of €6.5 billion ($8.1 billion), and the World Bank has agreed to provide €1.0 billion ($1.3 billion).
Third financing package
The IMF is moving quickly to help emerging markets battered by fallout from global financial turmoil and the sharp slowdown in the economies of advanced industrialized countries. The 185-member institution has more than $200 billion of loanable funds and can draw on additional resources through two standing borrowing arrangements with groups of IMF member countries.
The planned financing package for Hungary follows within days earlier announcements of tentative loan agreements with both Iceland and Ukraine. The IMF is also in discussions with several other countries about possible new lending programs.
Restoring confidence in Hungary
The IMF said in the statement that the Hungarian authorities have developed a comprehensive policy package designed to restore investor confidence and alleviate the stress experienced in recent weeks in the Hungarian financial markets. It will bolster the economy's near-term stability and improve its long-term growth potential, the IMF said.
Core measures under the program are designed to improve fiscal sustainability and strengthen the financial sector. Specifically, the package includes measures to secure adequate domestic and foreign currency liquidity, as well as strong levels of capital for the banking system.
Important measures in the fiscal area will reduce government financing needs and ensure longer term debt sustainability. "These strong policies justify the exceptional level of access to Fund resources—equivalent to around 1,020 percent of Hungary's quota in the IMF—and deserve the support of the international community," said IMF Managing Director Dominique Strauss-Kahn.
The success of the policy package will be a shared responsibility between all stakeholders in the country and the international community. The IMF has worked in close coordination with the European Union, the European Presidency, and the World Bank on the issue. "We will continue assisting the Hungarian authorities on how to adapt to the current global financial turmoil and to catalyze financing as needed," Strauss-Kahn added.
Comments on this article should be sent to imfsurvey@imf.org
