BUDAPEST: Hungary's government will work out a new economic growth plan to keep growth above zero, the economy minister said on Saturday adding that it needed the planned new financing agreement with the International Monetary Fund and EU to serve as a financial safety net.
National news agency MTI reported Matolcsy as saying at a conference that growth was Hungary's "real weakness" now. The 2012 budget is based on a projection for 1.5 percent GDP growth, but the government had already signalled this may need to be cut if main export market Germany also revises its growth outlook downwards.
In a surprise move, Hungary's centre-right government announced on Thursday that it would seek a new precautionary funding deal with the IMF and European Union, and planned to wrap up talks about the agreement by Feb. 2012.
Matolcsy said on Saturday that the new agreement would be a framework deal which would serve as a safety buffer, and which would not replace financing from the market.
"We can secure the state's financing by continuing to be present in the market.by reducing debt, plus if we also conclude a financial (safety) net with international organisations," Matolcsy was cited as saying.
Daily newspaper Nepszabadsag said on Saturday, citing a senior government source, that the amount of the new financing line would probably not exceed 4 billion euros by much.
It was not clear if the source was referring to only IMF financing or this amount would also include money from the EU. The newspaper also said, citing sources close to the government that Prime Minister Viktor Orban would personally sign the letter about Hungary's intention to seek a new financing agreement with the IMF and EU.
The paper said the government wanted to negotiate with lenders about the IMF's so called Precautionary Credit Line (PCL). The Economy Ministry was not immediately available to comment on the report.
Hungary needs to renew close to 5 billion euros worth of foreign currency debt next year, which also includes repayments of a previous loan from the IMF which saved Hungary from financial meltdown in 2008.
The country has been financing itself from the market for over two years now, and would face no financing shortfall for months even if it did not issue any bonds, as the government has significant cash reserves placed at the central bank, plus also has access to funds from private pension assets nationalised earlier this year.
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