IMF Survey: IMF, EU, and World Bank Line Up $25 Billion for Hungary

IMF News, October 28, 2008

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Publication date: October 28, 2008
Joint financing package totals $25.1 billion to bolster Hungary's economy amid recent financial market turbulence.
Package announced by the IMF, the European Union (EU), and the World Bank.
The announcement followed earlier outline agreements on IMF financing for Iceland and Ukraine.
IMF readiness and capacity:
- IMF is a 185-member institution.
- IMF 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.

IMF: 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.
European Union: stands ready to provide a loan of €6.5 billion ($8.1 billion).
World Bank: has agreed to provide €1.0 billion ($1.3 billion).

Main aims:
- Restore investor confidence.
- Alleviate stress in Hungarian financial markets.
- Bolster near-term economic stability and improve long-term growth potential.
Core measures:
- Improve fiscal sustainability.
- Strengthen the financial sector.
- Secure adequate domestic and foreign currency liquidity for the banking system.
- Ensure strong levels of capital for the banking system.
Fiscal measures:
- Important fiscal steps to reduce government financing needs and ensure longer term debt sustainability.

The IMF characterized the level of access as exceptional:
- Equivalent to around 1,020 percent of Hungary's quota in the IMF.
Statement on shared responsibility and coordination:
- Success of the policy package described as a shared responsibility between all stakeholders in the country and the international community.
- IMF worked in close coordination with the European Union, the European Presidency, and the World Bank.
- IMF commitment: "We will continue assisting the Hungarian authorities on how to adapt to the current global financial turmoil and to catalyze financing as needed," said IMF Managing Director Dominique Strauss-Kahn.

The planned financing package for Hungary follows within days earlier announcements of tentative loan agreements with both Iceland and Ukraine.
IMF is also in discussions with several other countries about possible new lending programs.

Source: IMF Survey online, October 28, 2008.