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ÁKK amended its financing plan for 2023, taking into account the modified net financing requirement of HUF 4,113 billion. The more favorable development of retail sales than expected, as well as the excess liquidity created by the demand for discount treasury bills (DKJ), made it possible to reduce the plan for HUF bonds, the debt manager said in a statement. The increase in the foreign currency financing plan is aimed at pre-financing the foreign currency bond maturities due in 2024 in the amount of nearly half a billion dollars, and also at mitigating the risks arising from international uncertainty, they add.
The interesting thing lies in the first sentence, because
The debt manager originally estimated a financing requirement of HUF 3,409 billion, but has now increased it by HUF 700 billion, which is roughly 0.9 percent of GDP.
So far, there is no answer as to why it was necessary to raise the financing requirement, since many people have already drawn attention to the uncertain situation of the budget, but the government’s deficit target of 3.9 percent has not been officially changed so far. Of course, this means an ESA (results-based) deficit, the cash flow deficit may differ from this, but in most cases the two go together. A higher financing requirement typically means two things:
- The government expects a higher cash flow deficit
- He wants to build up more reserves at the end of the year
For now, we don’t know which eventuality exists. At the same time, the amount can be revealing, since this year, with the euro exchange rate of HUF 408, the government counted on EU funds of HUF 900 billion in the budget. That is
the HUF 700 billion increase in the funding requirement could easily mean that the government is no longer counting on EU funds this year (cohesion and RRF funds).
In this regard, the Ministry of Finance will be able to give a precise answer, as soon as they respond, we will update the article.
The main changes in the financing plan:
- in the case of institutional HUF bonds, the auction plan decreased from HUF 2,872 billion by HUF 75 billion to HUF 2,797 billion, while the exchange auction issuance plan decreased from HUF 390 billion by HUF 150 billion to HUF 240 billion,
- The HUF household issuance plan increased by HUF 418 billion from HUF 4,667 billion to HUF 5,085 billion,
- The foreign currency financing plan increased by HUF 230 billion from HUF 2,897 billion to HUF 3,127 billion.
The amount of emissions planned for 2023 thus increased from HUF 10,827 billion by HUF 422 billion to HUF 11,249 billion. Regarding the sub-markets of public debt management, the time-proportional fulfillments according to the new financing plan were as follows
ÁKK increased the foreign currency financing plan by 230 billion forints in August. Modification of the financing plan creates the opportunity to issue a benchmark-sized euro bond, from which resulting surplus of funds for the pre-financing of ÁKK foreign currency bonds or before maturity can also be used for repurchases.
Budapest Economic Forum 2023
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In addition, the newly attracted source of foreign currency gives an opportunity to the burden of European Union funds for the pre-financing of programs to be implemented – similar to the practice of previous years. Thus e the uninterrupted implementation of programs can continue even if contrary to the Government’s intentions commission support for some programs would slip further – is stated in the announcement.
The modification of the foreign currency financing plan does not affect the dollar bond issuance plan, so no dollar bond issuance is expected in the remainder of 2023. In addition to all this, in accordance with previous practice, the ÁKK reserves the option of further private bond issuance, as well as the issuance of dollar and/or euro instruments within the framework of the newly launched Euro Commercial Paper (ECP) program, in case of investor demand.
Cover image credit: Craig Hastings via Getty Images
