Hungary to boost debt issuance to finance budget deficit

By Krisztina Than

BUDAPEST, Aug 26 (Reuters)Hungary plans to finance this year’s increased budget deficit by boosting forint-denominated government bond sales, the debt management agency AKK said on Wednesday.

The Finance Ministry said on Monday that the budget deficit could reach 7% to 9% of GDP this year due to a deeper-than-expected recession and costs linked to the COVID-19 pandemic.

This has forced the debt agency to modify its issuance plan as the deficit target of the 2020 budget increased to 3.6 trillion forints from 1.89 trillion.

Hungary’s economy shrank by an annual 13.6% in the second quarter, faster than analysts’ forecasts. Prime Minister Viktor Orban, a nationalist who has been in power for more than a decade, has said his government would draft a two-year plan to boost the economy next month.

The AKK said it has raised planned forint-denominated bond sales at auctions by 948 billion forints to 4.345 trillion forints ($14.55 billion) for the whole of this year. Of this increased issuance, 438 billion forints worth of bonds had already been issued by mid-August, it said.

The AKK also raised planned domestic bond issuance to retail investors, but said its target for 4 billion euros worth of foreign currency denominated bond sales for 2020 remained unchanged.

Hungary has already issued forex bonds worth 3.5 billion euros this year and the AKK said it planned to cover most of the remaining 500 million euros ($590.65 million) from a yen-denominated Samurai bond issue.

It said its strategic goals of extending the maturity of Hungary’s debt and keeping foreign-currency debt at a low level remained unchanged.

On Tuesday, the central bank said it would increase the amount of its weekly government bond purchases in the long segment of the Hungarian bond market.

($1 = 298.6800 forints)

($1 = 0.8465 euros)

(Reporting by Krisztina Than; editing by Barbara Lewis)

((krisztina.than@thomsonreuters.com;))

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