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Mihály Varga spoke about the financing of the central budget in 2021 in a video posted on the YouTube channel of the Ministry of Finance.
The Finance Minister assessed the Hungarian public debt management as stable and multifaceted.
According to him, no significant risks are expected in the year after the outbreak of the coronavirus epidemic, and the state also has significant reserves for them.
According to Varga, the government continues to adhere to the debt management principles followed up to now. “In practice, this means that next year the central government’s gross domestic product (GDP) debt will be reduced by 3.5 percent of GDP growth,” he said, adding that the debt-to-currency ratio is declining. and domestic investors are further strengthened in financing. , especially the role of the population.
Hungary’s public debt-to-GDP ratio is expected to rise to 80 percent.
The aim is to reduce the budget deficit and debt also in the coming years.
Varga also highlighted that the global economic recession in 2020 was more dramatic than in the financial crisis of 2008.
At the same time, he also said that the current crisis has hit the Hungarian economy in a more favorable position than in 2008.
The minister said it was the government’s job to provide immediate support to preserve jobs, rescue struggling companies and help economic players prepare for the post-epidemic situation. To remedy the situation, the state is mobilizing an amount of 28 percent of GDP, according to the minister’s statement.
According to Zoltán Kurali, CEO of Államadósság Kezelő Központ Zrt. Despite the increase in net foreign exchange issuance and pre-financing of foreign exchange expenditures in 2021, the exchange rate in the central budget remained below 20 percent. The average maturity of public debt increased from 4.2 years to 5.4 years, while the average interest cost of the debt could decrease during 2020.
The net financing need in 2021 is HUF 3,332 billion, which is financed by the net issuance of HUF 1,913 billion of government securities and the decrease in liquidity reserves formed in 2020, as well as the November 2020 issuance of foreign currency bonds.
A gross issuance of government securities worth HUF 8.6 billion is expected next year, taking into account the swap auctions, which is significantly lower than the average gross volume of public debt issuance of HUF 13.472 billion in 2020 and HUF 10,264 billion in the last five years.
ÁKK will increase its government bond exchange auction program to HUF 1.5 billion and will not hold a 3-year government bond auction in 2021. The bond issuance plan in auction guilders will be reduced to HUF 2.870 billion from HUF 5.18 billion expected in 2020. Next year, it is planned to further strengthen investor diversification in the institutional forint market by targeting domestic and international investors, including Asian ones, committed to sustainability. Hungary’s Green Bond Program will expand into the government forint bond market by issuing a new 30-year green forint bond at auction starting in the second quarter for domestic and foreign investors, he said.
The 2021 financing plan includes a net issuance of government retail securities of HUF 1 billion, in which they aim to reach the target of HUF 11 billion by 2023.
It will not be necessary to issue foreign currency bonds in 2021 due to the pre-financing implemented in November 2020, which will be used by ÁKK to repay the foreign currency bonds maturing in 2021.
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