IMF still open for talks with Hungary.

By bne IntelliNews July 23, 2010
There is still a slight chance for re-opening the talk between the IMF and Hungary, but the contry would need to make radical changes in its attitude towards the fiscal reform and the central bank wage ceiling, according to IMF representative in the country, Iryna Ivaschenko, quoted by Dow Jones . She underlined that the main differences between the IMF and the government concerned the approach of the government to the fiscal adjustment as well as the planned violation of the National Bank of Hungary (NBH) independence through the introduction of wage caps in the bank. Earlier, PM Viktor Orban practically rejected further negotiations with the IMF on the issue, emphasising that the cabinet would coordinate and discuss its budgetary plans only with the EC. Ivaschenko, however, pointed out that the IMF and the EC were joint lenders to the country and consequently, separate negotiations could not be led. The key requirements of the IMF for continuing the talks with the government centered around the preparation of sustainable fiscal reforms rather than measures with a temporary and unsustainable nature. She referred to the new financial sector tax, but also noted that the argument applied to a new tax on telecom and energy companies, which was reportedly considered by the government, as well. Ivaschenko pointed out that the IMF was not aware of plans for such taxes, and noted that ad-hoc measures were not desirable as they limited the transparency and predictability of the tax system and impaired economic growth. In a related statement, economy minister Gyorgy Matolcsy stressed that the government strategy could not be applied while the country lacked financial independence. He noted that the policy to achieve independence would lead to the gradual reduction of the government debt below the 60% of GDP benchmark level. Matolcsy reiterated that major structural reforms would be carried out in 2011 and 2012, regarding the public administration and the tax system, arguing that they would lay the ground for a period of expansion. The minister projected that GDP could thus reach 105% of the EU average by 2030.

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