Hungary receives $25.1bn bailout
Wednesday, 29 Oct 2008 10:45
Budapest to receive $25.1 billion in loans
The IMF, the EU and the World Bank have agreed to lend Hungary $25.1 billion (£15.6 billion) in emergency funding to rescue the country from collapse.
Under the package, the IMF will lend Hungary $15.7 billion (£9.7 billion), the EU is preparing a loan for $8.1 billion (£5 billion) and the World Bank has agreed to provide $1.3 billion (£0.8 billion).
The loan will be distributed over a term of 17 months.
Measures include securing adequate domestic and foreign currency liquidity, as well as strong levels of capital for the banking system.
"These strong policies justify the exceptional level of access to fund resources -equivalent to around 1,020 per cent of Hungary's quota in the IMF - and deserve the support of the international community," said IMF managing director Dominique Strauss-Kahn.
Hungary has been left exposed to the financial crisis because it is heavily dependent on foreign financing at a time when investors are pulling back.
The planned financing package for Hungary follows within days earlier announcements of tentative loan agreements with both Iceland and Ukraine.
The IMF, which has more than $200 billion in loanable funds, said it is also in discussions with other countries over the possibility of new lending programmes.
The 185-member institution added it will continue to assist Hungary as it adapts to the global financial crisis.
Yesterday the Bank of England warned of the danger facing emerging markets in the current financial climate.
The Bank's Financial Stability Report warned strains on these countries – from overreliance on financing from international wholesale markets, slowing economies, and the hit from high oil prices – could spill over to developed economies' banks once more.
"Large banks in developed economies with international operations could be exposed to significant credit losses," the Bank warned.