International Monetary Fund approves package of nearly $16 billion for Hungary

The International Monetary Fund (IMF) has approved a standby arrangement for Hungary worth nearly $16 billion to help the Central European country stave off a deepening of its economic troubles amid the global financial crisis.

The IMF Executive Board approved the request yesterday under its fast-track Emergency Financing Mechanism, and about $6.3 billion will be immediately given out as part of the agreement, which covers the next 17 months.

The Hungarian economy has come under particular stress in recent weeks as a result of the global financial crisis, with the country’s high debt levels, falling stock market and depreciating currency combining to add pressure to its financial system.

The standby arrangement is designed to support the economic programme devised by Hungarian authorities, which includes a substantial fiscal adjustment to ensure the Government’s debt financing needs decline, strong levels of capitals in the local banking system, and the maintenance of adequate liquidity in those banks.

John Lipsky, First Deputy Managing Director at the IMF, said he was confident that Hungary can weather its current difficulties by consistently implementing its programme and receiving continued support from the IMF, the World Bank and the European Union.

The measures proposed in the Hungarian programme tackle the country’s “most important vulnerabilities and should therefore underpin an improvement in investor confidence,” Mr. Lipsky said.

“Most important, the combination of accelerated fiscal adjustment and the introduction of a rules-based fiscal framework will help persuade investors that the Government’s short- and medium-term financing needs are being addressed.”