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This year, along with foreign currency debt, the stock of past due debt exceeds HUF 6 billion, while the coronavirus epidemic has already put the budget in an unfavorable economic situation. As a result, the risk of financing public debt is now higher than average, according to accountants.
Photo: MTI Photo / Szilárd Koszticsák
The coronavirus crisis hit the worst possible year in terms of public debt management, according to a recent analysis by the State Audit Office (SAO) summarized in its Popular Word. One reason is that the maturity level of public debt will be exceptionally high in 2020 and again in 2024, which will have to be rolled over if debt is not reduced in the meantime. This year, together with foreign currency debt, the past due debt portfolio exceeds HUF 6 billion. Államadósság Kezelő Központ Zrt’s task. (ÁKK) is to bring this money from the market, to which is added the financing of the current account deficit, which was originally set by the budget law at 367,000 million HUF, but which due to the epidemic would have to contribute 3,600,000 million HUF.
According to preliminary data, the general government deficit was 1,219 billion HUF, or 5.3 percent of GDP, in the first half of this year. Compared to the same period in the previous year, the balance decreased by HUF 1,378 million, or 6 percentage points of GDP.
The government has a miracle weapon for this: MÁP Plusz, which is still selling steadily, the bond interest rate is rising in a band, reaching six percent by the end of the fifth year, but it also provides a yield of the 4.95 percent for the entire term. Due to spring restrictions, sales fell, but now the average number of bonds sold has risen by HUF 78 billion per month. The good news for ÁKK is that in the first three quarters of the year, 83 percent of the annual public debt financing plan was fulfilled, of which 85 percent was allocated to securities for households. According to ÁKK data, households had HUF 8.619 billion in government bonds, an increase of HUF 703 billion compared to the beginning of the year.
At the debt manager, it is estimated that compliance with the current financing plan will require the sale of HUF 212 billion of retail government securities in the fourth quarter, representing an average monthly increase of HUF 50 billion in retail portfolios.
However, a significant part of the public debt continues to be financed by the institution’s investors (banks, investment funds, insurance companies), but the return offered to them is not as high as that of retail securities: the The five-year bond was only 1.76%, but not even the 10-year bond. and 2.36 percent on Friday, which means institutional investors won’t even get a real bond yield. The papers are still being bought from this, 85 percent of the annual plan has already been imported.
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