Budapest transport operator forced to take out huge emergency loan as city cash reserves run dry

Budapest’s public transport organiser, the Budapest Transport Centre (BKK), will take out a HUF 45 billion (around EUR 115 million) short-term loan after the Hungarian capital’s cash reserves dropped to critically low levels at the start of the week.

The decision was approved by Mayor Gergely Karácsony between two sessions of the city assembly in order to ensure the continued financing of Budapest’s transport services.

According to Népszava, the loan will be split between two banks. K&H Bank will provide HUF 30 billion, while MBH Bank will supply the remaining HUF 15 billion.

City officials say the measure is temporary and necessary to maintain liquidity until expected tax revenues arrive later in March.

Borrowing to maintain day-to-day operations

The loan is described as a short-term working capital facility, designed to ensure that BKK can meet its operational obligations throughout the year.

Budapest City Hall requested offers from several banks earlier this year, assessing proposals based on interest margins and additional costs linked to unused credit lines. Officials concluded that the K&H and MBH offers were the most favourable.

Importantly, the loan does not require approval from the Hungarian government, because it is scheduled to be repaid within the same fiscal year.

City Hall also emphasised that no municipal property has been pledged as collateral. Instead, the loan is backed by funding the city already provides to BKK through its public service contract.

Old debts still being settled

The new loan comes as BKK and the Budapest Transport Company (BKV) continue to settle HUF 65 billion in outstanding contractor payments carried over from the previous year, including interest.

Officials say the short-term borrowing effectively replaces earlier debts while helping the city manage ongoing cash flow challenges.

Ongoing dispute with the government

Budapest’s finances have also been strained by a dispute with the Hungarian government over the controversial “solidarity contribution” tax, which requires wealthier municipalities to transfer funds to the central budget.

In January, the Hungarian State Treasury withdrew HUF 11.7 billion directly from the capital’s account, further tightening liquidity.

To ensure that salaries and services could be paid on time, the city assembly previously authorised raising Budapest’s temporary borrowing limit from HUF 40 billion to HUF 50 billion until mid-March.

Hope for relief from business tax payments

City leaders expect the financial pressure to ease soon. Around HUF 120 billion in advance local business tax payments is expected to arrive in Budapest’s accounts in mid-March, which should significantly improve the capital’s cash position.

Until then, however, the emergency loan will play a key role in ensuring that Budapest’s buses, trams and metro services continue operating without disruption.

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