Budapest, November 4 (MTI) – Hungary has enjoyed price and financial stability since 2013, when changes got under way at the central bank, the bank’s governor, Gyorgy Matolcsy, said on Wednesday.
Addressing lawmakers in parliament in a debate of the bank’s 2012, 2013 and 2014 business reports, Matolcsy said the bank’s new leadership in place since March 2013 had returned to a “responsible, conservative, but creatively functioning” path for the central bank. The bank has supported the government’s economic policy, he added.
He said by 2013 the central bank had amassed a loss of 203 billion forints (EUR 645.5m) and in that year Hungary was trying to emerge from the excessive deficit procedure the EU had launched against it. The new leadership had worked down the debt and ended that year in the black, Matolcsy said. He said as a result Hungary had succeeded in exiting from the deficit procedure.
As regards a renewal in monetary policy, Matolcsy said the base rate had been reduced in two cycles and as a result the budget is 300 billion forints a year better off due to lower interest rates. The savings will add up to 500-600 billion forints a year by 2019, he said.
The bank’s funding for growth lending programme is expected to channel 2,300-2,400 billion forints into financing for small and medium-sized companies (SME), and more companies could benefit than under the 2007-2013 EU financial framework. The bank’s self-financing programme has helped to move bank financing towards state securities and now, with a new step, efforts are being made to stimulate market-based lending.
The bank has been following a medium-term inflation target system with a single medium-term goal of 3 percent inflation.
Central bank is building “community assets” from the public funds it generates with support from the government, Matolcsy said. All programmes aim to serve “public interests” such as raising education standards.
Matolcsy also mentioned that the bank has been asked to prepare a programme for 2016 which would result in gross domestic product (GDP) boosted by 0.5-1 percent.
Sandor Burany, Socialist head of Parliament’s budget committee, compared Matolcsy to a proverbial Hungarian aristocrat squandering his wealth, but said that “it is not Matolcsy’s own money he is throwing to the wind but hundreds of billions of public funds”. Burany blamed Matolcsy for the weakening of the forint, and suggested that a weak national currency was the source for the central bank’s profits “which Matolcsy spends as he likes”. He criticised the central bank for allocating some 250 billion forints to its foundations as well as for its purchase of expensive properties and artwork.
According to the small opposition Dialogue for Hungary (PM) party, all profits generated by the national bank should flow into the central budget and be distributed by parliament. PM spokesman Richard Barabas also blamed the central bank for buying “overpriced” works of art and “unnecessary” properties, and noted that in contrast, the ruling parties have recently refused to support PM’s proposal to ease child poverty in Hungary.