Hungary seeks new IMF agreement

Hungarian Prime Minister Viktor Orban Going back to the IMF will be seen as a U-turn by Prime Minister Viktor Orban

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Hungary expects to sign a new agreement with the International Monetary Fund (IMF) and the EU early next year, the Economy Ministry has said.

It comes a day after the ministry said it wanted "a new type of co-operation" with the IMF to act as an "insurance".

Hungary received an IMF-led bailout in 2008, but decided not to renew a standby loan agreement last year.

The EU said it was aware of Hungary's plans to ask for help but had not yet received a formal request.

The Economy Ministry said in a statement: "The government has started talks with the IMF and the EU about a new agreement that, instead of austerity measures, will aid Hungary's economic growth."

The meeting marks a reversal in policy. As recently as Monday, Economy Minister Gyorgy Matolcsy said that "this three-letter institution is opposed to every single one of our steps".

But its currency, the forint, has fallen to a record low against the euro this week and government bond yields have soared.

Two ratings agencies have also warned that Hungary could lose its investment-grade credit rating due to its weak growth outlook and unpredictable policy track.

Taxes on banks

Prime Minister Viktor Orban ended the 2008 IMF deal, which had been agreed under the previous government, last year.

Since then, he has put in place a series of unconventional measures, including big taxes on banks and an effective nationalisation of pension funds.

Mr Orban told Hungarian radio on Friday that he wanted a type of "insurance" agreement with the IMF, without having to give up Hungary's economic sovereignty.

But analysts said it would be difficult for the two sides to find common ground given the moves Hungary has made.

The IMF's representative in Hungary, Iryna Ivaschenko, said on Thursday that the team in Budapest was conducting a "regular review", which was "not a negotiating mission".

She added that the IMF had not received a request from the authorities to initiate negotiations on a Fund-supported programme.

The IMF said it had no further comment on Friday.

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