Hungary’s IMF negotiator to start talks in Washington

BUDAPEST (AFP) ― Hungary was set to kick off crucial bailout talks with the International Monetary Fund on Monday in Washington, Hungarian officials said, despite recent policy disagreements.

Hungarian negotiator Tamas Fellegi “already has talks today,” an economy ministry spokeswoman in Budapest, Zsofia Banhegyi, told AFP, adding he “will meet lots of people.”

The discussions were due to last until Thursday, but details of the talks, including their timeline, were kept under wraps.

“Offical information will be disclosed only after the multi-day negotiation round” and upon Fellegi’s return to Budapest, said Banhegyi.

Earlier, the economy ministry had only said that Fellegi would meet IMF managing director Christine Lagarde in Washington on Wednesday for talks.

But the IMF told AFP later Monday that Fellegi was due to meet Lagarde’s top deputy, David Lipton, on Tuesday, and Lagarde on Thursday. Several meetings with IMF economists were also scheduled.

Fellegi’s early arrival in the U.S. capital over the weekend came as Prime Minister Viktor Orban on Sunday abandoned previous conditions on an IMF bailout.

“For our part, there are no preconditions for starting talks with the IMF,” he told Hungarian state news agency MTI, adding that Fellegi was authorized to accept any type of credit that would help Hungary finance itself from the markets, without prior consultation with the government.

Fellegi, a minister without portfolio in Orban’s government, was also authorized to tell the IMF that Hungary would cooperate in implementing a required economic program developed in consultation with the lender.

“It is only natural that the IMF wants to see an economic program that will guarantee its money back,” Orban said.

His words soothed the markets, helping the forint rebound to 314.73 against the euro by 1425 GMT, after dropping to a record low of 324 per euro last week.

“Lots of things can happen... but for the moment we think that the government is really committed to changing its position,” Gabor Torok, chief analyst at the political think tank Vision Consulting, said Monday.

Hungary avoided bankruptcy in 2008 at the height of the global financial crisis thanks to a 20-billion-euro bailout from the European Union, the IMF and the World Bank.

After Orban came to power in May 2010 he quickly turned his back on the IMF.

Now, given the “critical situation” of Hungary, the government did not have much room for manoeuver, said Torok.

Gergely Suppan, an analyst at Takarekbank, the local branch of German DZ Bank, estimated: “We’ll have to wait until the end of February to see the deal concluded.”

“An agreement for three years and for 15 billion euros would be ideal,” he told AFP.

Budapest sought help from the IMF and EU in November, suggesting a 15-20 billion-euro ($20-25 billion) credit line after its currency, the forint, plunged.

IMF and EU officials however cut short preliminary talks in Budapest a month later over central bank reforms which they said would end the Hungarian institution’s independence.

After lawmakers adopted the legislation ― also criticized by the European Central Bank ― the forint fell to record lows, the country’s borrowing costs reached their highest level since 2009 and fears of a Hungarian default rose sharply.

European commissioners were set to look at the central bank act in Brussels on Wednesday.

Ratings agency Fitch meanwhile called for an agreement between Budapest and international lenders Friday as it joined Moody’s and Standard & Poor’s in downgrading Hungary to “junk” status.

Since taking office in May 2010, Orban’s government has gradually lost investors’ confidence due to its unorthodox policies.

The centre-right populist government effectively nationalized 11 billion euros of private pension assets, levied windfall taxes on sectors dominated by multinational companies, curbed the jurisdiction of the Constitutional Court, adopted a controversial new constitution, and placed its allies in key posts such as the state audit office, the media regulator and the fiscal council.