Hungary Aiming for 3-Year IMF Deal, Official Says

Hungary is seeking 15 billion euros in international loans over three years to stabilize its economy, a senior government official said on Monday, blaming the International Monetary Fund and the European Union for more delays in starting aid talks.

Central Europe's most indebted nation needs a precautionary loan to rein in borrowing costs and prevent further cuts to its credit rating, which has been driven down to non-investment grade by its high debt and by financial and legislative reforms that have been criticized by businesses and policymakers abroad.

"We need to create a package that is largely in line with market expectations," Mihaly Varga told private broadcaster TV2 in an interview.

"We should sign a 3-year precautionary deal, which would be worth around 15 billion euros," he said. "I deduced this from market expectations but I think by and large this is what we will be able to agree on."

An international safety net, which analysts say could allow the central bank to lower interest rates from 7 percent, the highest in central Europe, would also help Hungary roll over its external debt at more affordable prices.

After months of wrangling over contested public sector reforms, including a controversial central bank law, the European Commission gave the green light for official aid talks late last month, sparking a rally in Hungarian markets.

But negotiations that Hungary first sought in November have yet to start. Some analysts and investors suspect the government is playing for time, but Budapest on Monday again blamed its partners for more delays.

"The IMF negotiations are delayed now because the IMF and the EU have to discuss what conditions must be met for talks to start," Varga said.

"We are ready to start talks as early as tomorrow and we very much hope that after a lengthy period that is now almost an embarrassment, we can look forward to a much faster period of talks."

The European Commission wants Hungary to amend the central bank law before talks can start. The IMF has said it was ready to start talks as soon as Hungary takes "adequate steps" to ensure the independence of its central bank.

Many analysts expect an agreement to be reached only in the second half of the year.

Tamas Fellegi, Hungary's minister in charge of the aid talks, said last week an agreement could be sealed by the autumn.