Important news for the forint: deferred payment agreed with Russia on gas imports

HUNGARY - In Brief 04 Oct 2022 by Istvan Racz
The following was announced by Economy Minister Márton Nagy yesterday, causing the forint to strengthen in late trade and this morning. Hungary and Russia agreed that for all natural gas imported by Hungary in the six months between October and March 2023, payments will be deferred for the portion above a certain fix price for one, two and three years, payable in equal instalments. Effectively, this scheme will serve as a credit taken from Russia, reduce the immediate financing requirement of gas imports and, consequently, break the recent undesirable connection between the volatility of gas prices and the volatility of the forint's exchange rate. The price threshold, over which the regular payments by Hungary will be deferred, is kept confidential, but based on the information shared by Mr. Nagy, that the immediate reduction of payables over the 6-month period in question would reach €1bn if the current €175/MWh price is maintained at the Dutch TTF gas market, Portfolio.hu estimated it must be close to €120/MWh. Should gas prices rise in the coming six months, the payment scheme would work as a safeguard against any resulting volatility of the EURHUF exchange rate. Another development announced by Mr. Nagy yesterday was a decision by the government cabinet to permit the take-out of 0.8 bcm of cushion (base) gas from one of Hungary's major underground gas storage facilities. This would not only reduce import needs but also earn some HUF630bn (€1.5bn) for the budget, as that cushion gas was stored in at a very much lower cost than the current import price of gas. However, this seems a little bit like a desperate measure, as a storage facility normally becomes inoperable...

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