Thursday, the International Monetary Fund's Executive Board approved a $15.7 billion or 12.3 billion euros loan for Hungary to help the country in avoiding severe financial market pressures. The loan is a 17-month standby arrangement and was approved under IMF's fast-track Emergency Financing Mechanism procedures.
The Washington-based IMF said in a statement that about $6.3 billion would be made available immediately. The balance amount would be provided in five installments subject to quarterly reviews.
The international lender said the loan is designed to facilitate the rapid reduction of financial market stress in Hungary. It is also meant to underpin the country's longer-run economic goals by creating conditions necessary to facilitate appropriate reforms in government finances and in the banking sector.
Earlier, the European Union provided $8.4 billion to the crisis-hit Hungary, while the World Bank had supplied $1.3 billion in aid. Altogether, the nation has received $25.8 billion in financial support from IMF, the European Union and the World Bank. According to the IMF, this financial support will provide Hungary with the amount of reserves that is sufficient to meet its external obligations, even in extreme market circumstances.
John Lipsky, First Deputy Managing Director and Acting Chair of IMF said, "Reducing financial market stress will require both a high degree of policy discipline and large external financing".
The IMF noted that Hungary was among the first emerging market countries to suffer from the fallout of the current global financial crisis. The nation's high external debt levels, which amounted to 97% of GDP at end-2007, and significant balance sheet mismatches, negatively affected investor appetite for Hungarian assets.
"Hungary was hit hard by the global deleveraging", the IMF said. The lender expects the process to leave less foreign capital available to quickly return to Hungary.
The IMF also forecast that Hungarian economy will contract 1% in 2009 after expanding 1.75% this year. "Growth is not expected to reach its estimated potential of 3 percent until after 2011".
In exchange for the loan, the IMF said a substantial fiscal adjustment is required to provide confidence that the government's financing need can be met in the short and medium run, considering the large public debt. The lender has sought a large structural fiscal adjustment of 2.5% of GDP with emphasis on expenditure measures, consistent with the need to reduce the country's large public sector.
Further, bank capital enhancement is needed to ensure that banks are sufficiently strong to weather the imminent economic downturn, both in Hungary and in the region, the IMF said. Additionally, the lender said large external financing assistance is needed to support Hungary's return to normal international funding.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.