{
  "title": "IMF Survey: IMF Agrees $15.7 Billion Loan to Bolster Hungary's Finances",
  "publication": "IMF News, November 6, 2008",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/socar110608a",
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  "summary": "The IMF's Executive Board approves a $15.7 billion loan for Hungary as part of a program designed to ease financial market stress in the East European country while supporting longer-run economic goals of reforming government finances and the banking sector.",
  "publishDate": "2008-11-06",
  "sections": [
    {
      "heading": "Program overview and purpose",
      "content": "- IMF Executive Board approved a $15.7 billion loan for Hungary to ease financial market stress and support longer-run reforms of government finances and the banking sector.\n- The Stand-By Arrangement duration: 17-month Stand-By Arrangement for Hungary.\n- The arrangement was approved under the Fund's fast-track Emergency Financing Mechanism and entails exceptional access amounting to 1,015 percent of Hungary's IMF quota.\n- Immediate availability: $6.3 billion immediately available; remainder disbursed in five installments subject to quarterly reviews."
    },
    {
      "heading": "Financing package composition",
      "content": "- Total financing package: $25 billion.\n- European Union commitment: €6.5 billion ($8.4 billion).\n- World Bank commitment: $1.3 billion.\n- Context: IMF also approved a $16.4 billion loan for Ukraine on November 5."
    },
    {
      "heading": "Two key objectives of the IMF-supported program",
      "content": "- Implement a substantial fiscal adjustment so the government's debt-financing needs will decline.\n- Maintain adequate liquidity and strong levels of capital in the banking system to restore stability in the financial sector and create conditions for economic recovery."
    },
    {
      "heading": "Fiscal measures and public finance adjustments",
      "content": "- Program envisages a large structural fiscal adjustment of 2½ percent of GDP with emphasis on expenditure measures.\n- Measures include reductions in the overall government wage and pension bill: nominal wage adjustments postponed and pension bonuses suspended.\n- Low-income pensioners excluded from benefit reductions.\n- Introduction of a rules-based fiscal framework to put fiscal sustainability on a permanent footing.\n- Rationale: reduce the large size of the public sector to ease short-term financing pressures and improve medium-term debt sustainability."
    },
    {
      "heading": "Banking sector measures",
      "content": "- Preemptive recapitalization of eligible banks to ensure high capital levels.\n- Strengthening of the supervisory and crisis management abilities of the Hungarian Supervisory agency.\n- Banking sector support package includes provisions for added capital and resources to finance a guarantee fund for interbank lending.\n- Objective: ensure banks are sufficiently strong to weather the imminent economic downturn and reduce the risk of losses from balance-sheet mismatches."
    },
    {
      "heading": "Macroeconomic context and vulnerabilities",
      "content": "- Hungary population: a country of around 10 million people.\n- Hungary joined the European Union in 2004.\n- High external debt levels: 97 percent of GDP at end-2007.\n- Balance-sheet mismatches and high external debt reduced investor appetite as global liquidity declined and risk aversion rose.\n- Despite policy strengthening since 2006, Hungary was hit hard by global deleveraging and rising perceptions of counterparty risk."
    },
    {
      "heading": "Economic outlook and projections",
      "content": "- Growth: projected to contract to -1 percent in 2009 from around 1¾ percent in 2008.\n- Recovery: growth not expected to resume until 2010 and converge towards its estimated potential of 3 percent until after 2011.\n- Inflation: peaked at 9 percent in early 2007; projected to reach 4 percent at end-2009.\n- Transmission channels: weak private consumption and investment due to sharp reduction in new bank lending and exchange rate depreciation.\n- External environment: slow recovery expected because slowdown is occurring in Hungary's main trading partners and global deleveraging will leave less foreign capital available."
    },
    {
      "heading": "Key elements and policy implications",
      "content": "- Fiscal: substantial structural adjustment of 2½ percent of GDP, expenditure-focused, rules-based fiscal framework.\n- Banking: upfront bank capital enhancement, preemptive recapitalization, strengthened supervision and crisis management, interbank guarantee fund financing.\n- External: large external financing assistance to minimize the risk of a run on Hungary's debt and currency markets given the large stock of external debt.\n\nSource: IMF Survey online, November 6, 2008 — \"IMF Agrees $15.7 Billion Loan to Bolster Hungary's Finances\".\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- IMF Country Focus\n- Hungary and the IMF\n- Ukraine gets IMF loan\n- Factsheet: IMF crisis lending\n- Hungary lines up loans\n- IMF urges stimulus\n- World must act together\n- Quick, forceful action needed\n- IMF warns on failure to act\n- Rethink financial system\n- Emerging markets pulled in\n- Stand-By Arrangement for Hungary\n- Emergency Financing Mechanism\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar110608a"
    }
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    "[Markdown version](/en/news/articles/2015/09/28/04/53/socar110608a/index.md)",
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    "Published: November 6, 2008",
    "IMF Executive Board approved a $15.7 billion loan for Hungary to ease financial market stress and support longer-run reforms of government finances and the banking sector.",
    "The Stand-By Arrangement duration: 17-month Stand-By Arrangement for Hungary.",
    "The arrangement was approved under the Fund's fast-track Emergency Financing Mechanism and entails exceptional access amounting to 1,015 percent of Hungary's IMF quota.",
    "Immediate availability: $6.3 billion immediately available; remainder disbursed in five installments subject to quarterly reviews.",
    "Total financing package: $25 billion.",
    "European Union commitment: €6.5 billion ($8.4 billion).",
    "World Bank commitment: $1.3 billion.",
    "Context: IMF also approved a $16.4 billion loan for Ukraine on November 5.",
    "Implement a substantial fiscal adjustment so the government's debt-financing needs will decline.",
    "Maintain adequate liquidity and strong levels of capital in the banking system to restore stability in the financial sector and create conditions for economic recovery.",
    "Program envisages a large structural fiscal adjustment of 2½ percent of GDP with emphasis on expenditure measures.",
    "Measures include reductions in the overall government wage and pension bill: nominal wage adjustments postponed and pension bonuses suspended.",
    "Low-income pensioners excluded from benefit reductions.",
    "Introduction of a rules-based fiscal framework to put fiscal sustainability on a permanent footing.",
    "Rationale: reduce the large size of the public sector to ease short-term financing pressures and improve medium-term debt sustainability.",
    "Preemptive recapitalization of eligible banks to ensure high capital levels.",
    "Strengthening of the supervisory and crisis management abilities of the Hungarian Supervisory agency.",
    "Banking sector support package includes provisions for added capital and resources to finance a guarantee fund for interbank lending.",
    "Objective: ensure banks are sufficiently strong to weather the imminent economic downturn and reduce the risk of losses from balance-sheet mismatches.",
    "Hungary population: a country of around 10 million people.",
    "Hungary joined the European Union in 2004.",
    "High external debt levels: 97 percent of GDP at end-2007.",
    "Balance-sheet mismatches and high external debt reduced investor appetite as global liquidity declined and risk aversion rose.",
    "Despite policy strengthening since 2006, Hungary was hit hard by global deleveraging and rising perceptions of counterparty risk.",
    "Growth: projected to contract to -1 percent in 2009 from around 1¾ percent in 2008.",
    "Recovery: growth not expected to resume until 2010 and converge towards its estimated potential of 3 percent until after 2011.",
    "Inflation: peaked at 9 percent in early 2007; projected to reach 4 percent at end-2009.",
    "Transmission channels: weak private consumption and investment due to sharp reduction in new bank lending and exchange rate depreciation.",
    "External environment: slow recovery expected because slowdown is occurring in Hungary's main trading partners and global deleveraging will leave less foreign capital available.",
    "Fiscal: substantial structural adjustment of 2½ percent of GDP, expenditure-focused, rules-based fiscal framework.",
    "Banking: upfront bank capital enhancement, preemptive recapitalization, strengthened supervision and crisis management, interbank guarantee fund financing.",
    "External: large external financing assistance to minimize the risk of a run on Hungary's debt and currency markets given the large stock of external debt.",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[IMF Country Focus](https://www.imf.org/en/news/country-focus)",
    "[Hungary and the IMF](https://www.imf.org/external/country/HUN/index.htm)",
    "[Ukraine gets IMF loan](https://www.imf.org/external/np/sec/pr/2008/pr08271.htm)",
    "[Factsheet: IMF crisis lending](https://www.imf.org/external/np/exr/facts/crislend.htm)",
    "[Hungary lines up loans](https://www.imf.org/external/pubs/ft/survey/so/2008/CAR102808B.htm)",
    "[IMF urges stimulus](https://www.imf.org/external/pubs/ft/survey/so/2008/NEW110608A.htm)",
    "[World must act together](https://www.imf.org/external/pubs/ft/survey/so/2008/NEW101308A.htm)",
    "[Quick, forceful action needed](https://www.imf.org/external/pubs/ft/survey/so/2008/NEW100908A.htm)",
    "[IMF warns on failure to act](https://www.imf.org/external/pubs/ft/survey/so/2008/NEW100708A.htm)",
    "[Rethink financial system](https://www.imf.org/external/pubs/ft/survey/so/2008/POL100708A.htm)",
    "[Emerging markets pulled in](https://www.imf.org/external/pubs/ft/survey/so/2008/NEW100708C.htm)",
    "[Stand-By Arrangement for Hungary](https://www.imf.org/external/np/sec/pr/2008/pr08275.htm)",
    "[Emergency Financing Mechanism](https://www.imf.org/external/pubs/ft/survey/so/2008/POL100908B.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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