The government's new financing plan has been clarified

HUNGARY - In Brief 28 Aug 2020 by Istvan Racz

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Just days ago, the Finance Ministry raised its 2020 fiscal deficit forecast drastically, to 7-9% of GDP from the previous 3.8% level. This represented the third amendment of the deficit target/forecast so far this year, from the original target of just 1% of GDP.Yesterday, the ÁKK reduced the uncertainty created by the Ministry's statement, by giving away details on how they intend to finance the excess of the deficit. ÁKK now expects the annual cash deficit at HUF 3600bn (8% of GDP), using the midpoint of the range set by the Ministry. But this is HUF 1710bn higher than the previous forecast. On how to finance this, the ÁKK said the following:- they want to issue HUF 948bn more of HUF-denominated bonds through auctions;- they are expecting HUF 882bn more sales of retail bonds in net terms;- but they are not raising the previous EUR 4bn target for the gross issuance of FX-denominated bonds any further.The basis of these increases is the May amendment of the annual financing plan.In terms of what sort of measures are being taken to secure the achievement of the new targets, the following seems to be the case momentarily:- for auctioned bonds to be sold to institutions, the MNB has just announced to raise its weekly purchases to HUF 40bn. It is not immediately clear exactly what proportion of the excess borrowing requirement can be covered by these extra purchases. But the MNB also said that the HUF 40bn target amount had been set for the next few weeks only, and generally, the MNB is intent to buy as much of (super-long-term) government bonds as required by the market situation. Other than this, ÁKK is stressing that this year's bond sales are actually running ahead of ...