During the PPS, six review missions were carried out to
Hungary, with the participation of ECB observers: 4-8 April 2011, 9-21 November
2011, 16-28 January 2013, 4-10 December 2013, 24-27 June 2014, and 25-28
November 2014. The first three missions were conducted jointly with IMF
post-programme monitoring missions (which was closed in August 2013).
Basic facts about the programme
In response to the serious market turbulences and
difficulties in refinancing government and external debt in the first half of
October 2008, the Hungarian authorities applied to the EU, the IMF and the World
Bank for financial assistance.
Following negotiations in October 2008 between the IMF and
the Commission staff on the one hand and the Hungarian authorities on the
other, an agreement was reached to provide multilateral financial assistance to
Hungary with an overall amount of €20 billion, consisting of the following
contributions:
- European Community, €6.5billion under a balance-of-payments assistance facility approved by the Council on 4 November 2008;
- International Monetary Fund, SDR 10.5 billion (around €12.5 billion) under an IMF Stand-by arrangement approved on 6 November 2008;
- the World Bank, €1.0 billion.
The balance of payments assistance was designed in four
separate disbursements, each tied to achievement of policy conditionality on
fiscal consolidation, fiscal governance, financial sector regulation and
supervision, and other structural reforms. The EU financial assistance was
eventually disbursed for a total of €5.5 billion, instead of €6.5 billion
initially scheduled:
- €2.0 billion, released in December 2008 upon agreement on the Memorandum of Understanding (MOU);
- €2.0 billion, released in March 2009;
- €1.5 billion, released in July 2009.
Overall, Hungary received €14.2 billion of balance of
payment assistance composed of €8.7 billion from the IMF and €5.5 billion from
the European Union. No financial assistance was drawn from the World Bank.
The interest rate on the amounts disbursed by the European
Commission is 3.25% for the first two installments and 3.625% for the third
one, with repayments started in 2011.
The first two instalments have been fully repaid by Hungary
on 9 December 2011 and on 7 November 2014. EUR 1.5 billion are still
outstanding, which will mature on 6 April 2016.
Request for a second BoP assistance programme
On 21 November 2011 Hungary requested a second
(precautionary) financial assistance from the EU and the IMF against the
background of deteriorating financing conditions. The ECOFIN Council of 30
November took a favourable decision in principle. Problems with the respect for
independent institutions (notably the central bank) delayed the start of
negotiations.
Eventually, negotiations were limited to one official round
(between 17-25 July 2012) as Hungary was successful in financing itself through
the international market and did not request further assistance. For example,
the country raised USD 3.25 bn in 2013 and was able to redeem before schedule
all reimbursements of the 2008-2010 Stand-by Arrangement (i.e. the Fund
equivalent of an EU BoP programme) to the IMF.
Key events
2014
- 2 December: Commission staff concludes the sixth Post-Programme Surveillance mission to Hungary - HU
- 1 July: Commission staff concludes the fifth Post-Programme Surveillance mission to Hungary
2013
- 11 December: Commission staff conclude fourth Post-Programme Surveillance mission to Hungary
- 16 - 28 January: Commission's mission to Hungary encourages continued progress in fiscal consolidation while paying more attention to raising growth potential
2012
- 17 - 25 July: Mission to Hungary starts the negotiations on financial assistance
- 25 April: Commission decides to enter into negotiations on precautionary financial assistance with Hungary
2011
- 21 November: Statement of the European Commission on the request by Hungary of possible financial assistance.
- 8 April: Commission's mission to Hungary welcomes commitment to structural reform and calls for further details on deficit cuts.
2010
- November: European Commission BoP assistance agreement expiration.
- July: European Commission and IMF meet with the banking community active in Hungary , Commission postpones conclusion of fifth review on the EU's balance of payments assistance to Hungary
- 7-9 June: Commission visit to Hungary for informal discussions.
- 15 February: European Commission concluded its fourth review of the EU medium-term financial assistance to Hungary.
- 15 January: Signature of the Third Supplemental MoU.
2009
- 16 November: Commission concludes third review of the EU balance-of-payments assistance for Hungary.
- 6 July: Disbursement of the third instalment (€1.5 billion).
- 10 June: Signature of the Second Supplemental MoU.
- 26 March: Disbursement of the second instalment (€2.0 billion).
- 11 March: Signature of the Supplemental MoU.
2008
- 9 December: Disbursement of the first instalment (€2.0 billion).
- 19 November: EU provides €6.5 billion Community financial assistance to Hungary. Loan agreement and Memorandum of Understanding (MoU) between EC and Hungary signed.
- 4 November: The Council approves the grant of a loan to Hungary to support its medium term balance of payments.
- 30 October: Commission proposes financial assistance to Hungary and an increase in overall BoP loans ceiling .
Key documents
- EU Balance of Payments Assistance to Hungary: Sixth review under Post-Programme Surveillance (2 MB) - 19 February 2015
- EU Balance of Payments Assistance to Hungary: Fifth review under Post-Programme Surveillance (541 kB) - 30 September 2014
- EU Balance of Payments Assistance to Hungary: Fourth review under Post-Programme Surveillance (504 kB) - 18 February 2014
- EU Balance of Payments Assistance to Hungary: Third review under Post-Programme Surveillance (984 kB) - 8 April 2013
- Third supplementary Memorandum of Understanding - January 2010
- Second supplementary Memorandum of Understanding - June 2009
- First supplementary Memorandum of Understanding - March 2009
- Memorandum of Understanding - December 2008
- 2009/102/EC - Council Decision of 4 November 2008 providing Community medium-term financial assistance for Hungary
- COM(2008) 716 final. 30 October 2008 - Commission Recommendation for a Council Decision granting mutual assistance for Hungary. Proposal for a Council Decision providing EU medium-term financial assistance for Hungary.
