Hungary tells IMF to leave after paying out loan

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Details Published on Tuesday, 16 July 2013 21:51 Written by BC & Agencies




Hungary has announced plans to repay its bailout loan from the International Monetary Fund early and asked the organization to leave the country.
The head of Hungary's Central Bank Gyorgy Matolcsy wrote a letter to IMF Managing Director Christine Lagarde on Monday asking for it to close its representative office in Budapest as it was "not necessary to maintain" it any longer.
The IMF says it is ready to agree since the current IMF representative in Hungary is due to leave soon anyway.
Hungary is heading for a general election next year, and many see the move as an attempt to show the government's ability to avoid austerity programs and to act without outside help.
Others point that actually Hungary is, slowly but surely, getting in the position where it can do without the IMF. As a sign of that in February, Hungary sold $3.25 billion in foreign-currency bonds to investors, returning to the international debt market for the first time in nearly two years.
National Bank of Hungary President said in the same letter that, while they appreciated "the valuable support" the Washington-based group gave the country, the stand-by credit program "is almost complete." Matolcsy also outlined some of the successes achieved by the government, including of cutting of the state budget deficit to below 3 percent of its gross domestic product, as a result of "bold fiscal consolidation measures" and structural reforms.

Some of the "bold" measures have included the nationalization of some $14 billion in assets previously managed by private pension funds, windfall taxes on banks and other companies, taxes on all financial transactions and telephone calls, a flat income tax rate of 16 percent, forcing gas and electricity companies to cut utility prices for households and, at 27 percent, the EU's highest VAT rate.
In 2008, amid the global crisis Hungary was saved from bankruptcy with a $26 billion rescue package from the IMF and the EU. Two years later Prime Minister Viktor Orban's government decided not to renew the deal to avoid closer IMF scrutiny of its economic policies.
However, in 2011, Economy Minister Matolcsy turned to IMF for a precautionary deal but didn't get any reply.
In February 2013 Prime Minister Orban issued the country's first international bond since 2011, thus demonstrating the country could go it alone by borrowing on global financial markets.
Relations between Orban's government and the IMF have always been strained. In 2010, when Orban came to power, his government issued laws, which were criticized as curtailing democracy, the justice system and freedom of speech.
The European Parliament responded with a resolution calling on Hungary to repeal the supposedly "anti-democratic changes."


Good move by Hungary as what Iceland did.........