Hungary Asks IMF To Leave by Margit Feher from The Wall Street Journal

Hungary Asks IMF to Leave

IMF Says It Won't Fill its Office in Budapest

By
• MARGIT FEHER

BUDAPEST—Hungary's central bank on Monday asked the International Monetary Fund, which helped rescue the country from the brink of insolvency in 2008, to close its Budapest office, as authorities here seek to reassert their sovereignty ahead of national elections next year.
In a letter to IMF Managing Director Christine Lagarde, the new central bank governor Gyorgy Matolcsy wrote that since the standby loan agreement between Hungary and the IMF is about to end, "we have come to the conclusion that it is not necessary to maintain" the IMF's representative office.
The IMF said it would follow the government's request.
"As Ms. Iryna Ivaschenko's posting as Resident Representative in Hungary was due to end in late August and the IMF's presence in member countries is at the invitation of country authorities, the IMF will not seek to replace her," said spokeswoman Angela Gaviria.

Prime Minister Viktor Orban's government, which took office in 2010, has often chafed at what it views as interference by the IMF and the European Union in policy-making.
Mr. Matolcsy, a former cabinet minister under Mr. Orban who was the architect of unorthodox economic policies that drew criticism from the IMF and the EU, said the central bank "appreciated the constructive cooperation" with the IMF. He also reiterated that Hungary is "considering a possible early repayment" of the IMF loan.
Hungary was the first European country to be bailed out by the IMF after the fall of the U.S. investment bank Lehman Brothers and the onset of the global financial crisis. The IMF extended a standby loan of about loan of about $15.7 billion dollars; the EU provided about half that in assistance.
Repayment of the IMF portion is due to be completed by September 2014.
After declaring that Hungary didn't need outside help, Mr. Orban in November 2011 reluctantly sought IMF assistance again in an effort to reduce borrowing costs and stabilize his country's fragile currency. But disagreements over central bank independence impeded progress toward a new deal, which was later abandoned as market conditions improved.
Amid a flood of global liquidity because of the easy-money policies of the U.S. Federal Reserve and other major central banks, Hungary has been able to fund itself by borrowing on capital markets.
With national elections coming next year, Mr. Orban's Fidesz party is stepping up what it calls a "freedom fight" against those it argues are infringing on Hungarian sovereignty. It is also trying to boost the economy, something Mr. Matolcsy has worked to support at the central bank.
"This is related to the election campaign. The government could showcase that they have already paid the loans back that the previous government made necessary and that they have already sent the IMF back home," said Mariann Trippon, chief analyst at CIB Bank in Budapest.
"The government has the financial capability to pay the IMF loan back on time or if it wants, ahead of the deadline," Ms. Trippon added.
The government has already reduced its budget deficit to below the EU cap of 3% of annual gross domestic product and was released in June from special budgetary surveillance by the European Commission, the EU's executive branch.
Both the IMF and EU have said that Hungary has relied too much on short-term measures to close its budget gap instead of undertaking more comprehensive structural changes.
Separately, Hungary has also tangled with the EU on issues including judicial independence and media freedom.