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    EU, IMF to help Hungary after forint slumps

    AFP
    13.10.2008 - 15:17 | Son Güncelleme:

    The European Union and IMF stand ready to help Hungary’s government with financial support if needed after its currency, the forint, slumped last week, the EU said.

    After the forint took a recent beating amid global financial market turmoil, the International Monetary Fund had offered Hungary "technical and financial assistance," the EU said in a statement.

    "We are committed to use all available instruments with a view to supporting Hungary in steering its economy through these difficult times and to withstand the market pressures," it said in a statement.

    "In particular, the EU stands ready to use all tools available in accordance with the (EU) Treaty to complement possible IMF financial assistance," it added.

    Analysts said Hungary’s currency had fallen because investors had panicked and moved their capital out of the country.

    With a massive deficit on the flow of all current payments into and out of the country, known as the balance of payments on current account, the financial crisis has hit Hungary hard owing to its dependence on foreign funds to finance the economy.

    Overnight from Thursday to Friday, the currency fell by 10 percent before recovering as the central bank intervened massively in the markets to support the currency.

    Hungary has long run one of the biggest public deficits, or overspending by central government, welfare systems and local authorities, in the European Union. However this deficit has been brought down sharply from a peak of 9.2 percent of national output in 2006 to 3.8 percent last year. The EU ceiling is 3 percent.

    Finance Minister Janos Veres has warned that the 2009 budget would have to be revised due to impact of the financial crisis.

     

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