March 26th, 2014

Hungary loser of IMF loan repayment, says Bajnai

Hungary lost 14 billion forints (EUR 44.86m) on the early repayment of a loan to the International Monetary Fund (IMF), Gordon Bajnai, leader of the electoral alliance E14-PM, said on Wednesday.

Bajnai spoke in response to economic state secretary Gabor Orban saying earlier in the day that the early repayment of the IMF loan had helped Hungary rebuild investor confidence last year.

Bajnai said in a statement that the Hungarian state had exchanged its IMF loan for a more expensive one. He insisted the repayment was similar to taking out a loan under “usurious” conditions in order to repay another one. Hungary lost 14 billion forints on the “propaganda move” of Prime Minister Viktor Orban and central bank governor Gyorgy Matolcsy, he said.

Bajnai added that Hungary has signed a loan to finance the Paks nuclear upgrade which is twice as expensive as the one it had repaid to the IMF. The loan — while sacrificing the country’s financial-economic sovereignty — will have the “added bonus” of electricity costing double of its current price and the economy being sacrificed to Russian power and financial interests for decades, he said.

Gabor Orban said earlier on Wednesday that the IMF had begun to acknowledge the achievements of the Hungarian economy and it was hoped that the European Commission and rating agencies would soon follow suit. Hungary was no longer an “IMF programme country” after it had repaid its loan, but talks were held last week on an annual evaluation of economic status, where the IMF was “constructive”.

The state secretary said dollar bond issues worth 3 billion froints so far would suffice to finance two-thirds of foreign loans this year. The bond issue has temporarily raised the debt-to-GDP ratio by 2.3 percentage points, but the government continues to stand by its goal of debt reduction by the end of the year, he added.

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  • FUCeausescu

    In other words, Bajnai thinks IMF loans are the best thing since sliced bread. Nothing about the strings attached that come with, which are basically a wish-list of IMF fund contributors and other global financial interests. Like I said, the new Socialist slogan “Bankers of the world unite”

    Best is to never have to deal with them, thanks to Socialists, Hungary had to. If you do deal with them, try to get rid of them as soon as possible. There is a reason why IMF is called the option of last resort.

    Aside from that, the early re-payment was a boost to market confidence, because it highlighted Hungary’s ability to access the bond markets, which I believe translates into a far bigger gain than the $44 million Bajnai thinks Hungary lost.

    • That’s right. Let’s have a look at this graph, for example, with special regard to the drastically falling yield:

      http://www.portfolio.hu/img/upload/2014/03/140325auction3M.jpg

    • Aloof

      So the 1.5 Trillion HUF of unnecessary interest payments on the US bonds that Orban took out instead was a better deal for Hungarian taxpayers just so Orban could prove a point? That on top of the 3 Trillion HUF from private pension funds he stole. On top the 235 BHUF he has lost on the MOL deal and on top the $3 Billion US Bond deal he just broadsided the Hungarian taxpayers with? That on top of the E.ON deal he got soaked on by the Germans, the weak forint and of course how can we forget the “deal of the fucking century” PAKS II?
      What parallel universe do you live on? Hungary’s debt is at an ALL TIME high and the March 19th $3 Billion Dollar US Bond or PAKS II hasn’t even been accounted for or factored in yet.
      And Hungary is about to elect and reward this fucking “genius” with another super majority win? And you’re going to tell me that Hungary isn’t fucked up?

      • FUCeausescu

        Bajnai gave us the cost, based on calculating the difference in interest paid on IMF loans versus Market loans, which is $60 million.

        Benefit however is that the headline of “Hungary re-pays IMF loan ahead of schedule” is market positive.

        Now let us assume that the effect on interest rate was only 0.1% (very conservative estimate).

        Hungary has %100 billion in debt, therefore about $15 billion maturing each year. In addition, there is the roughly $3 billion deficit, for a total of $18 billion worth of debt that needs to be serviced in a year. So do the math $18 billion X 0.1 = $180 mill.

        • Aloof

          Like I said a parallel universe… I’m talking facts and you’re talking assumptions and “market positive.” More diversionary partial meaningless drivel…

          • FUCeausescu

            You are talking facts? Give me a break. Just because you do not have the capacity to understand something, does not mean you should dismiss it. The figure I used is very conservative. Take a look at the chart Leto provided.

          • Aloof

            I’m talking facts about Orban’s economy and his economic moves since he took office in 2010 and you’re talking complete bullshit.
            I fully understand that you’re full of shit like everyday that you post here.
            Bonds are debt asshole just like the interest that Hungary will pay for PAKS II before a single hammer is lifted for construction you dipshit.
            Orban’s ONLY economic policy is kicking the can down the road moron.

          • Reality Check

            Please, point out to FUC that the yield trend was moving down long before the IMF payment (Aug. 13, 2013) and announcement of such. In that dataset I see no market positive effect. I have looked at a few other indicators and I see none their either.

    • MagyarViking

      “In other words, Bajnai thinks IMF loans are the best thing since sliced
      bread. Nothing about the strings attached that come with”

      So if IMF offers half the interest and no strings, you are then wrong in your statement?

      Can you pls inform us on those “strings attached” to the emergency loan from November 2008 that Fidesz now paid off 14 BHUF more expensive?

      Some facts can hardly disprove your point, right?

      • FUCeausescu

        IMF loan hardly ever comes with no strings attached and the 2008 deal had strings attached until Hungary refused to renew it. It is true that there were no strings attached to the loan still outstanding, so it was not necessary to pay it off early from that perspective.

        As I pointed out however, the early re-payment scheme was very good advertisement to the market that Hungary has no trouble accessing funds by selling bonds. Was that advertisement worth $60 million? As I already pointed out, given that every year Hungary has to access the market for almost $20 billion, a positive perception on the country is very important. That is why I cringe every time your Socialist heroes such as Sheppele drag the country’s reputation through the mud with her distortions and exaggerations. You on the other hand applaud, so do all the Hungarian Socialists. This is why almost no one wants to vote for them, even if not particularly happy with current government.

        • MagyarViking

          So, you here clearly admit:
          “It is true that there were no strings attached to the loan still outstanding, so it was not necessary to pay it off early from that perspective”
          meaning your statement:
          “Nothing about the strings attached that come with, which are basically a wish-list of IMF fund contributors and other global financial interests. Like I said, the new Socialist slogan “Bankers of the world unite””

          was a total lie, then Gyurcsany fixed a loan from IMF/EU WITHOUT any strings attached

          Something Whorban has been unable to do….so who is the Hungarian PM that has been MOST successful in getting favourable credits from IMF/EU in Hungary’s history – EVER?

  • Corrigator

    If Bajnai thinks Hungary lost, that’s the best guidance to be certain that Hungary has improved.

    • Reality Check

      Absolutely, why bother examining the facts and logic of Bajnai’s case. Certainly only an independent-minded critical thinker would waste their time looking at the substance of an argument, when they could just dismiss it based on who said it.

      • Corrigator

        Bajnai has had his chance – he will have no more. The absolute spinelessness.

      • FUCeausescu

        “why bother examining the facts and logic of Bajnai’s case”

        Well did you do a rough cost/benefit analysis on this?

        Bajnai gave us the cost, based on calculating the difference in interest paid on IMF loans versus Market loans, which is $60 million.

        Benefit however is that the headline of “Hungary re-pays IMF loan ahead of schedule” is market positive.

        Now let us assume that the effect on interest rate was only 0.1% (very conservative estimate).

        Hungary has %100 billion in debt, therefore about $15 billion maturing each year. In addition, there is the roughly $3 billion deficit, for a total of $18 billion worth of debt that needs to be serviced in a year. So do the math $18 billion X 0.1 = $180 mill.

        Let us not forget that showing those vampires the door is priceless in terms of national satisfaction. Except if you are a Socialist these days of course. It is funny isn’t it? Conservative politicians fight against being dominated by global finance, while Socialists who historically were for the people cannot stand the very concept of global finance not dominating the economy. It is a colossal betrayal of people’s trust that surely will go down in history.

        • Reality Check

          “Now let us assume that the effect on interest rate was only 0.1% (very conservative estimate).”

          No, a very conservative ASSUMPTION.

          Yes, let’s look at Leto’s graph. What happens to the trend in the yield. Nothing! It was moving down before the announcement and payment of the IMF early payment (Aug. 12, 2013). Look at other indicators at that time and there is no change in mid-term trends.

  • pantanifan

    Bajnai is an intelligent guy, with a lot of financial/economic knowledge, but he sometimes lacks “political antennae”. Whether he is right or not doesn’t really matter, is it sensible to campaign on this issue – is it a votewinner to try and bring back the IMF?

    • Democrat

      He has not for one moment suggested bringing back the IMF. He is simply refuting the Orban lie that early repayment was beneficial. Agreed, he does seem to lack the political antennae. That is why his year at the helm was largely technical and, given the mess, highly successful. His hand on the tiller reduced the credit risk spread dramatically. When countries are in a mess the markets like boring leaders who are not pulled this way and that by their cronies. Like him or not, if Bajnai were to return the rate of investment in Hungary would jump significantly and quite quickly. This would give a real increase in employment and strengthen the HUF. A 10% improvement in both (achieveable in two years) would go a long way to putting us back on the rails in a sustainable way.

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