According to the current position, the general government deficit will be HUF 1.2 billion higher than expected. Due to the crisis, the population will lend less to the state, so the public debt administrator plans to issue four times more securities in foreign currency.

Hungary has given a mandate to Citigroup, ING Bank and JP Morgan to organize a Eurobonds issue, writes Mfor.hu based on the announcement of the Public Debt Management Center (ÁKK). In accordance with past practice, the debt manager did not provide further information on the additional details of the foreign exchange source’s involvement.

Originally, the GDMA planned to issue bonds worth € 1 billion in foreign currency this year, which was increased to € 4 billion with the amendment. In recent years, the government has significantly reduced the government’s foreign currency debt and forced forint domestic borrowing. Of course, this was the right decision, for example, the dramatically torn forint exchange rate does not support its budget as much, for example, because the ratio of foreign currency debt to public debt is relatively low.

The population will finance the state less

As Prime Minister Viktor Orbán announced, due to the epidemic situation, the government expects the general government’s annual deficit to be not 1 percent of GDP, but 2.7 percent. At the moment, it is questionable whether the new deficit target will be sustainable, in any case, the cash deficit of the central subsystem (which does not include local governments and social funds) increased accordingly from HUF 367 billion to HUF 1,234 billion to HUF 1.601 billion.

Given the increased demand for financing and the partly changed market situation, ÁKK has updated its financing plan for 2020, the newspaper writes. Unsurprisingly, the debt manager predicts a decline in retail sales compared to previous plans, meaning they expect the public to be less rushed by government stocks in the crisis, including the recently introduced MÁP + , which has been extremely successful so far.

Now we must also do it in euros.

The highest deficit of HUF 1.234 million and the expected increase of HUF 590 billion in the redemption and repurchase of government retail securities, as well as the repurchase of HUF 244 billion in short-term foreign currency bonds in January 2020, which are not included in the original plans, require an increase in gross emissions. Additionally, taking into account current market trends, the debt manager plans to sell retail sales at approximately HUF 900 billion below originally planned. As a result, ÁKK intends to increase gross financing in two main areas.

On the one hand, the planned volume of institutional forint bond issues increased by HUF 1.652 billion for 2020 as a whole. This is mainly based on the frequency of weekly auction of government bonds at 3 and 5 years introduced from April this year, while the issuance of securities at 10, 15 and 20 years is cautiously maintained and increased according to the market opportunities. On the other hand, it increased the envelope of bond issuance in foreign currency by 1 billion euros in the original plans to the equivalent of 4 billion euros.



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