Hungary IMF deal steadies forint, but nerves spread

By Krisztina Than

BUDAPEST (Reuters) - An IMF rescue deal steadied Hungary's battered currency on Monday, but the ripples of the global crisis spread to other emerging markets, with Polish and Turkish officials saying more steps were needed to boost confidence.

After reaching a $16.5 billion (10.7 billion pound) loan agreement with Kiev to shore up Ukraine's teetering economy, the International Monetary Fund said on Sunday it would finalise a deal with Budapest in the next few days to bolster Hungary's near-term stability.

Facing the worst global financial crisis since the 1930s, the countries need the IMF's help to restore confidence in their currencies and bonds after investors dumped their assets over worries that an inability to finance large foreign debt obligations could spark balance of payments problems.

Hungary needs IMF help -- unprecedented for a European Union member state -- to shore up its markets after investors sold off Hungarian assets on worries over its banking system and the financing of its large external debt.

The forint currency's almost 20 percent dive in the last month has unnerved investors elsewhere in the EU's fast-growing ex-communist bloc, previously seen as a safer bet than most other emerging economies.

"The purpose ... is to create a safety net for Hungary," Prime Minister Ferenc Gyurcsany said. "We want the world to see that Hungary can surround itself with friends who will be able to protect it."

The IMF did not disclose the size of the package, but analysts said it should be over $10 billion, based on the IMF's agreement in principle with Ukraine to a $16.5 billion standby loan, also announced on Sunday.

"The policies Hungary envisages justify an exceptional level of access to Fund resources," IMF Managing Director Dominique Strauss-Kahn said in a statement.