BRUSSELS (Reuters) - Hungary is preparing to go it alone by borrowing on global financial markets after the IMF turned down its bid for a flexible loan deal, the country’s prime minister said on Wednesday.
“Hungary asked for a flexible credit line and finally the International Monetary Fund said ‘no’,” Viktor Orban said at a seminar at Brussels think tank Bruegel, adding that his country would borrow on international markets in the coming weeks.
“The negotiations are still open but now we are very close to that ‘no’,” Orban said.
European Union member Hungary has yet to finish paying back an EU/IMF loan that helped avert a meltdown of its markets and banking system in 2008.
It talked to the IMF and the European Union about a financing backstop last year but negotiations stalled when Budapest resisted pressure to cut spending and back down on policies such as heavy taxes on financial and energy companies.
And while Budapest wanted precautionary support, the IMF insisted on a standby loan facility, subject to conditions and monitoring.
The outcome of the talks means the indebted central European country will aim to roll over its debts from the markets without an IMF safety net.
Hungary, which last tapped international markets in 2011, is now preparing for a foreign currency bond issue.
“We will go out to the markets probably this month or the beginning of the next month,” Orban said. “Why would we need to get any kind of loan from the IMF if we are able to be financed from financial markets?”
Guntram Wolff, an economist with Bruegel, questioned this strategy. “Hungary cannot be considered at the same level as Poland when asking for a flexible credit line,” he said.
“It’s all very well to say you are going to markets, the question is: what is the interest rate and is it sustainable?”
Orban, who faces elections in 2014, has made clear he will not accept foreign influence on his economic policymaking, which some investors have criticised for going against EU orthodoxy.
But the IMF said earlier this week that while Hungary showed a strong commitment to fiscal consolidation, it relied too much on ad-hoc measures such as tax hikes and a new transactions tax.
The Fund said Hungary’s economic prospects were difficult and it was at risk from any shift in sentiment on currently calm markets.
Additional reporting by Jan Strupczewski; editing by Rex Merrifield/Ruth Pitchford