beyondbrics

Hungary is returning to talks with the International Monetary Fund – except it’s not.

This, in a nutshell, was the somewhat bizarre communication from Budapest last night, muddying a commitment from Hungary’s economy ministry that talks with the IMF would likely resume in the Autumn.

Lajos Kosa, ruling Fidesz party deputy chairman, told Hungarian television late on Monday:

“The credit line agreement with the IMF expires (in October) and after that we can stay in touch, but it does not stem from this that we would like to open a new credit line…”

“Keeping in contact with the IMF could be significant as this is an important signal for international markets,” Kosa said, adding that there had not been a change in Hungary’s stance on relations with the IMF. (Reuters reports)

If you’re a little baffled by what Hungary is up to, join the club. We’ll keep it simple then by recapping the story so far. Feel free to draw your own conclusions.

1.     Viktor Orban fights the Hungarian election on a tax cutting and job creation ticket, promising to renegotiate the country’s deficit cutting committments with the IMF.

2.     Orban wins a landslide victory in April and becomes prime minister. But officials quickly put their foot in it by comparing the economy to Greece.

3.     Orban unveils a 29-point economic plan, including a controversial ft 200bn financial sector levy. He promises to meet this year’s 3.8 per cent deficit target, helping to soothe investors’ nerves.

4.     Fidesz party officials say they would like to extend the current IMF agreement and negotiate a new IMF deal for 2011.

5.     But in July budget talks between the government and IMF collapse amid a range of policy disagreements.

6.     Economy minister Gyorgy Matolcsy then says IMF talks will resume in September.

7.     But Orban tells parliament he wants to restore Hungary’s economic self-rule; Hungary doesn’t need the IMF, only the EU. Analysts speculate he is playing to the crowd because of upcoming municipal elections.

8.     In spite of all the noise, the forint recovers, amid a more benign global market outlook. But in late August the forint wobbles again as investors digest some downbeat growth and inflation forecasts.

9.     Hungary’s economy ministry promptly announces that talks with the IMF will resume in the Autumn and “an agreement will be reached”. But Kosa later clarifies that this doesn’t necessarily mean that Hungary wants a new credit line.

10. What ever next…?

Related:

Hungary’s wobbles return

Hungary’s GDP – a game of two halves

Romania vs Hungary: who deals best with the IMF?