IMF satisfied with fiscal policy

The Hungarian budget policy is adequate, concluded James Morsink leader of the delegation of the International Monetary Fund (IMF). The IMF analysts came to examine the fiscal policy measures taken since the loan agreement have been concluded between Hungary and the IMF in November.


The analysts approved of the lowering of the key interest rate last week but advise caution and prudence regarding further decrease.
According to IMF both the 2008 and the 2009 financial aims are achievable. The delegation came to Hungary last week to audit the financial and economical developments and the visit has ended December 15. The financial conditions improved since October and the Forint seems to be stabilized, the state bond yields decreased and parent banks are supporting their Hungarian branches, said Morsink. At the same time external financing conditions remain difficult and may further decline in 2009.
“While the banks are currently in strong positions, the ongoing global deleveraging and the economic downturn make it important that Hungarian banks have access to capital enhancement and borrowing guarantee facilities similar to those available to banks in other EU countries," contined the IMF analyst.
The delegation approved of the lowering of the key interest rate in two phases – 50 basis points each, in two weeks – as the inflation decreased faster than expected mostly due to the drop in fuel and food prices. Regarding a proposal by opposition leader Fidesz for a sharp and immediate base rate cut to 6%, Morsink reiterated his earlier comments on the necessity of a cautious and gradual approach to future rate cuts. Morsik emphasized the importance of “continued implementation of economic policies consistent with the program", which is “essential to maintain investor confidence and minimize the depth of the economic downturn”.
The evaluation of IMF was realistic and supportive said Álmos Kovács, state secretary of the Financial Ministry to Hungarian station, InfoRadio. The IMF analysts agree with the economic decision taken, the budgetary aims and the strategy to support the bank sector, he added. It completely normal that in loan programs of this size the IMF keeps close contact with the country. This was an unofficial visit and the first official visit can be expected in February 2009.


The BpSun Staff

17.12.2008