'Hungarian Central Bank Announces Growth Package', By Ferenc Kumin
- 8 Apr 2013 9:00 AM
By Ferenc Kumin, Deputy State Secretary For International Communications In Hungary: <br>“The main goal of the Central Bank is to achieve financial stability,” said György Matolcsy, the bank’s governor, at a press conference this morning. “Once that is achieved, the Central Bank is to support growth policies of the government,” he said and then outlined the bank’s new growth package. Just like the recent yield cut decision, there was nothing surprising in the announcement. Nothing that Hungary’s economic policy makers have not been emphasizing for months now. Nothing market experts have not been expecting.
Portfolio.hu has an excellent summary in English of the growth package and its details, so I’ll just touch on a couple of key points. The Central Bank’s main goal here is to reduce the foreign currency debt burden, which hangs like a millstone on the country’s economic growth.
The package consists of three pillars. The first one is a refinancing program this summer, providing low-interest loans in forints to Hungarian SMEs to pay back FX loans. The second is a debt conversion program with the aim of converting the foreign currency debt of SMEs into more affordable, less volatile HUF debt. The third pillar aims at reducing bank vulnerability by lowering short-term external debt, cutting the two-week Central Bank bond deposit to HUF 3600 bn from HUF 4500 bn.
The package follows in the footsteps of the Bank of England’s “funding for lending” program. The Hungarian stock exchange is seeing a significant rise since the announcement, with the largest Hungarian bank paper, OTP leading the rally. As of this writing, the forint, after a minor setback, is also gaining in value since the new package was announced.
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