Budapest says it may be able to cover October salaries, but November pay could be at risk if the city fails to reach an agreement with the government over its finances. The warning comes after the capital repaid a HUF 67 billion (EUR 185 million) bank loan and faces another major payment in October.

Budapest repays HUF 67 billion loan

Budapest has received HUF 118 billion (EUR 325 million) in local business tax revenue so far this month, but most of the money is already earmarked for outstanding financial obligations, according to Ambrus Kiss, director-general of the Mayor’s Office.

Speaking at a background briefing on Thursday, Kiss said the capital had used part of the tax revenue to repay its HUF 67 billion overdraft facility with OTP. The existing credit agreement expires on 18 September.

The bank could provide Budapest with a new credit facility only if it is satisfied that the city will be able to repay the money, Kiss said. The capital therefore needs an agreement with the government on its future financing before it can regain access to a financial safety net.

Budapest is expected to have around HUF 3.5 billion (EUR 9.65 million) left in its account by the end of September after further outstanding payments are made. Kiss said this should be enough to cover October salaries, but November wages could become difficult to finance without an agreement with the government, Magyar Hang writes.

These figures confirm that the city’s financial situation remains tight despite the arrival of the second instalment of local business tax. Portfolio reported on Thursday that Budapest has introduced a series of spending restrictions in an effort to maintain its ability to operate.

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HUF 86 billion payment due in October

Another major challenge is scheduled for mid-October, when Budapest is due to pay HUF 86 billion in solidarity contribution to the state.

The payment was previously postponed until 15 October. Under the current arrangement, the Hungarian State Treasury could collect the amount directly from the city’s account. The 2026 regulation sets Budapest’s full-year solidarity contribution at around HUF 97.7 billion, including the HUF 86 billion instalment due in October.

Kiss said the city would not have sufficient new revenue to cover such a payment while continuing to finance its operations.

“Eighty-six billion forints simply will not come in,” Kiss said. “We still have to reach an agreement with the government.”

The issue has already had a significant impact on Budapest’s finances. In July, the Hungarian State Treasury deducted HUF 7.5 billion from the capital’s account in connection with an outstanding solidarity contribution payment.

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Spending and hiring freezes remain in place

Budapest has introduced several emergency measures to limit spending. A commitment freeze means that the municipality and the Mayor’s Office require specific approval for new expenditure, while the threshold for the capital’s institutions is HUF 20 million.

A hiring freeze has also been introduced, and new institutional investments have been suspended. Kiss described the resulting operation as heavily restricted and said the measures would remain in place until an agreement with the government is reached.

The city has also started postponing some payments. According to Telex, ArrivaBus, Budapest’s second-largest bus operator, has been asked to wait until March for payment of invoices worth around HUF 9 billion.

Budapest and government continue talks

Kiss did not disclose details of the negotiations with the government, saying this could jeopardise their outcome. He confirmed, however, that Budapest has been in talks with competent government representatives, including the Finance Ministry.

The city needs a longer-term solution to its financing problems, particularly because essential public services will continue to require funding. Kiss argued that if Budapest could no longer provide these services, the state would ultimately have to take responsibility for them.

The government has also indicated that it is looking for new forms of cooperation with Budapest and other major cities in areas including public-service organisation and investment.