Is the Hungarian government stocking up on foreign money before the 2026 elections?
The Hungarian government has doubled its planned foreign currency bond issuance for 2025 in a bid to address worsening budgetary pressures. With a higher deficit target and limited access to EU funds, the government is increasingly relying on international borrowing to finance fiscal measures ahead of the 2026 elections.
Increase in foreign currency bond issuance
According to G7, the Hungarian government has announced a significant increase in its foreign currency bond issuance for 2025, aiming to raise a net HUF 1,685 billion (EUR 4.2 million), twice the amount originally planned. This move, disclosed by the Government Debt Management Agency (ÁKK), comes amid growing concerns over the sustainability of this year’s budget. Contributing factors include a weakening economic environment and generous, election-focused fiscal policies. In a related update, the Ministry of National Economy raised the projected cash-based budget deficit by HUF 651 billion (EUR 1.6 million) to HUF 4,774 billion (EUR 11.8 million), signalling a greater reliance on borrowing to plug the gap.
Fidesz to ramp up handouts?
Observers have noted that the ruling Fidesz party may need to ramp up public handouts in the run-up to the 2026 elections, a strategy that hinges heavily on the government’s ability to secure funding. Despite earlier warnings that reduced public spending or a drop in domestic bond purchases could curb the state’s largesse, such conditions have yet to materialise. Still, questions remain over the fiscal space available for measures like tax exemptions for large families and additional allowances for the armed forces.
The figures highlight a strategic turn towards foreign borrowing. Gross foreign currency borrowing will now total HUF 2,833 billion (EUR 7 million), significantly above the earlier target of HUF 1,558 billion (EUR 3.8 million). This expansion will push Hungary’s foreign currency debt slightly beyond the 30% ceiling of total government debt. At the same time, the ÁKK has scaled back forint-based borrowing, with the net increase in financing needs equalling the HUF 651 billion (EUR 1.6 million) rise in the deficit. According to the Ministry, key reasons for the widening shortfall include delays in receiving EU recovery funds, disappointing macroeconomic indicators, and new fiscal commitments.
EU funds and U.S. tariffs
Looking ahead, the Hungarian government faces considerable risks. EU recovery funds remain uncertain, as Hungary has yet to fulfil the necessary conditions to unlock the full allocation. Market reactions to global events, such as a potential U.S. tariff war, could further complicate financing. While Hungary is likely to find buyers for the new bond issuance under current conditions, questions persist over pricing and longer-term sustainability. With growth likely to fall below the government’s 2.5% forecast, further revisions to the debt issuance plan later this year appear probable.
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