Emerging economy Hungary has taken out a multi-billion-euro loan with the International Monetary Fund on to help the country’s struggling financial system cope under the excess strain of the global financial crisis.
Budapest has received aid from the EU and the World Bank as well
The 24-month stand-by loan of 12.3 billion euros ($15.7 billion) was announced Thursday, Nov. 6, under the IMF's Emergency Financing Mechanism. Ukraine was awarded a similar package worth about 12.9 billion euros Wednesday.
The Hungary deal includes immediate access to around 4.9 billion euros in funding -- the stand-by aspect of the deal that allows an IMF member state to address a temporary, emergency financial crisis, the 185-nation lender said in a statement.
The rest of the loan is to be disbursed in five installments subject to quarterly reviews.
Hungary is already receiving cash injections from other quarters -- 6.5 billion euros from the European Union and one billion euros from the World Bank.
"The IMF arrangement is designed to facilitate the rapid reduction of financial market stress in Hungary, while supporting the country's longer-run economic goals by creating conditions necessary to facilitate appropriate reforms in government finances and in the banking sector," the IMF said.
"Specifically, the IMF-supported economic program is based on two key objectives: to implement a substantial fiscal adjustment to ensure that the government's debt-financing needs will decline; and to maintain adequate liquidity and strong levels of capital in the banking system."
Debt the cause
Ukrainians were among the first to suffer under the financial crisis
Hungary has been harder hit by the credit crisis than any other eastern European economy. It was among the first emerging market economies to suffer under the financial crisis.
Hungarian Prime Minister Ferenc Gyurcsany this week proposed a $5-billion rescue plan for the country's economy.
"Hungary's high external debt levels, which amounted to 97 percent of gross domestic product at end-2007, and significant balance sheet mismatches, negatively affected investor appetite for Hungarian assets," the IMF said.
"Financial markets in Hungary have come under significant stress in recent weeks, reflecting the rise in perceptions of counterparty risk."
Ukraine, meanwhile, has struggled with problems in its banking system as well as with the falling price of steel, its principle export.
Ukrainian President Viktor Yushchenko last week said Ukraine would have been forced to default on billions of dollars of bonds issued on international markets if it hadn't received help from IMF.
"This (the IMF loan) is a signal for world society to increase its level of trust towards our country,” Yushchenko said Thursday.