Post-programme surveillance

The balance of payments programme for Hungary expired on 3 November 2010, and it was then subject to post-programme surveillance (PPS). PPS ended in January 2015, as Hungary had repaid more than 70% of its EU loan.  

During post-programme surveillance (PPS), 6 review missions were carried out to Hungary, with the participation of European Central Bank (ECB) observers on the following dates:

  • 4-8 April 2011
  • 9-21 November 2011
  • 16-28 January 2013
  • 4-10 December 2013
  • 24-27 June 2014
  • 25-28 November 2014

The first 3 missions were conducted jointly with International Monetary Fund (IMF) post-programme monitoring missions (which was closed in August 2013).

Basic facts about the programme

In the first half of October 2008, the Hungarian authorities applied to the EU, the IMF and the World Bank for financial assistance because Hungary was experiencing:

  • serious market turbulences
  • difficulties in refinancing government and external debt

In October 2008 it was agreed between the IMF, European Commission staff and the Hungarian authorities that Hungary would receive an overall amount of €20 billion in multilateral financial assistance. The contributions were as follows:

  • €6.5billion from the European Community under a balance of payments assistance facility approved by the Council on 4 November 2008
  • SDR10.5 billion (around €12.5 billion) from the IMF under an IMF stand-by arrangement approved on 6 November 2008;
  • €1 billion from the World Bank

The balance of payments assistance was designed in 4 phases with each release of funds tied to achievement of policy conditions on

  • fiscal consolidation
  • fiscal governance
  • financial sector regulation and supervision
  • other structural reforms.

A total of €5.5 billion in EU financial assistance was released, instead of the €6.5 billion initially scheduled:

  • €2 billion released in December 2008 upon agreement on the memorandum of understanding (MOU)
  • €2 billion released in March 2009
  • €1.5 billion, released in July 2009

Overall, Hungary received €14.2 billion of balance of payment assistance composed of €8.7 billion from the IMF and €5.5 billion from the European Union. No financial assistance was drawn from the World Bank.

The interest rate on the amounts paid out by the European Commission is 3.25% for the first 2 installments and 3.625% for the third one, with repayments started in 2011.

The first 2 instalments were fully repaid by Hungary by 9 December 2011 and on 7 November 2014. €1.5 billion is still outstanding and will become due for repayment on 6 April 2016.

Request for a second BoP assistance programme

On 21 November 2011, Hungary requested a second (precautionary) financial assistance from the EU and the IMF because of deteriorating financing conditions. The ECOFIN Council of 30 November agreed in principle to the request. Problems with the respect for independent institutions (notably the  central bank) delayed the start of negotiations.

Eventually, negotiations were limited to 1 official round from 17 to 25 July 2012 because Hungary was able to finance itself through the international market and did not request further assistance. For example, it raised US$3.25 billion in 2013 and was able to redeem before schedule all reimbursements of the 2008-2010 stand-by arrangement (the fund equivalent of an EU BoP programme) to the IMF.

Key events

2014

2013

2012

2011

2010

2009

2008

Key documents

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