IMF should be realistic about Hungary deficit

The International Monetary Fund should be realistic when considering a deficit target for Hungary for 2011, ruling Fidesz party vice chairman Lajos Kosa told public television m1 on Wednesday.

When asked in an interview whether lenders' expectations for Hungary to cut its deficit to 2.8 percent of GDP next year from a target of 3.8 percent in 2010 was too strict, Kosa said:

"It is obvious that Hungary's situation is one of the most difficult of all member states in European Union. In such a situation, expecting us to run the lowest deficit …. they can say that, but this will not work.

"The IMF must be mindful to remain grounded in realities."

A review of Hungary's 20 billion euro IMF/EU funding agreement signed in Oct. 2008 was suspended on Saturday after lenders failed to get sufficient clarity of the new centre-right Fidesz government's future economic policies.

The forint fell about 3 percent after the news on Monday, which also rattled global financial markets as investors fretting over Europe's debt problems.

The currency posted modest gains early on Wednesday, firming to 286.40 versus the euro by 0616 GMT from lows of 292 per euro early in the week.

Prime Minister Viktor Orban, who will meet German Chancellor Angela Merkel later on Wednesday, said on Tuesday that the only firm expectation the IMF can have under the 2008 agreement is for Hungary to bring its deficit to 3.8 percent of GDP in 2010.

He said on any other issue, including the selection and timing of policy tools on how to achieve that deficit, the loan agreement, which will expire in October, had no bearing.

Kosa told public television on Wednesday that Hungary, which has been under the EU's excessive deficit procedure since joining the bloc in 2004, would at some point cut its deficit below 3 percent of GDP but declined to say when it would do so.

"We will achieve this and this is our intention," Kosa said. "As to what numbers next year's budget will contain, that will be revealed only when we submit it (to parliament in October)."