Hungary’s Government Debt Agency (AKK) has revised its financing plan after the National Economy Ministry (NGM) raised its cash-flow deficit forecast by HUF651bn (€1.62bn) to HUF4.7 trillion for 2025 after the ministry released May budget figures on June 10. The 2025 deficit target was hence revised to 4.1% from 3.7%.

The data showed the budget ran a surplus of HUF129.5bn last month due to the HUF213.5bn dividend payment by state-owned energy company MVM. Excluding that one-off payment, the budget would have incurred a HUF84bn shortfall, in line with trends in the previous years.

As a result, the deficit in the first five months widened to HUF2.8 trillion, or 68% of the full-year, cash-flow-based target, and 58.6% after the latest revision.

The government cited the absence of EU recovery funds, weaker-than-expected macro data, and measures such as the personal income tax exemption for mothers.

At a joint press conference of NGM and AKK, the state secretary of the ministry said higher FX issues will cover the gap in 2025. To meet the higher deficit targets, the debt manager raised its net foreign-currency issue target from HUF838bn to HUF1.68 trillion, which translates to gross €3.2bn and net €2.2bn of FX issues.

AKK will decide on the timing, maturity and the currency of the bonds later, depending on market conditions, CEO Mihaly Hoffmann added.

"Tapping the deep and easily accessible FX bond market is currently the optimal funding tool. In addition to covering increased funding needs, FX issuance will improve the flexibility of debt management, facilitate liquid reserve accumulation and contribute to the diversification of the debt portfolio," according to the updated financing plan.

The revision will lift the share of FX financing to 30.2% of state debt, a fraction over the 30% target threshold, which, according to AKK, could remain over 30% at the end of 2026.

The share of retail securities owned by households is set to reach 20.1% by the end of the year.

Higher FX bond issuance will also allow AKK to reduce slightly the net issuance target for the institutional HUF market by HUF344bn to HUF2 trillion, while the net issuance target on the retail HUF market will remain unchanged at HUF915bn

AKK noted that it has completed 88% of the financing plan for 2025. In the case of net FX funding, the ratio reached 127%, while for institutional HUF funding it was 92%, while in retail it stood at 42%. The net outflow from government bonds after the maturity of high-yielding government securities did  not materialise, it added.

The planned total net issuance target will increase by 0.6% of GDP in line with the increased cash-flow-based deficit from 4.7% of GDP to 5.3% of GDP, but total net issuance will remain below the 2020-2024 period average.

Total gross issuance in 2025 will increase by HUF481bn to HUF13 trillion.

The revision of financing requirements represents another indication that the government is slowly relinquishing EU recovery fund resources, opting instead to cover the financing gap through foreign currency bond sales. This strategic shift raises questions about whether credit rating agencies possessed this information when they recently maintained Hungary's debt ratings unchanged, financial website Portfolio.hu writes.

The government cut its GDP forecast earlier this year from 3.4% to 2.5%, but the last projections also appear appears increasingly optimistic. Most analysts now expect growth to hover between 0.5% and 1%, yet the cabinet insists that weaker output will not materially affect tax revenues, arguing that the shortfall stems primarily from lower investment and exports rather than domestic consumption. This argument is attracting scepticism, Portfolio.hu adds.

When the growth forecast was downgraded from 3.4% to 2.5%, fiscal planners accounted for a tax revenue shortfall equivalent to 0.3% of GDP. Why a more pronounced slowdown would now leave revenues unaffected remains unclear, it noted.

In the meantime, Parliament approved amendments to the main figures of the 2026 budget, which left the deficit of the central budget at HUF4.2 trillion. The draft budget bill submitted to Parliament assumed 4.1% growth, 3.6% inflation and a 3.7% deficit. Lawmakers are expected to vote on the budget on June 17.