“The reduction of sovereign debt must continue, and according to plan the government wants to reduce sovereign debt to 60 percent of GDP by 2022”, Minister of Finance Mihály Varga said at a press conference in Budapest on Thursday.

“The state of public finances is stable; the ratio of sovereign debt to Hungary’s gross domestic product is continuously decreasing and could fall to around 66 percent by the end of the year, following 70.2 percent at the end of 2018”, he highlighted.

“Within sovereign debt, the government wishes to continue to increase the ratio of government securities owned by the public, and according to plan the target is to increase the quantity of government securities owned by households to 11 trillion forints (EUR 33.35 billion) from the current level of 7500 billion (EUR 22.74 billion), Mr. Varga indicated.

“Sales of the Hungarian Government Security Plus bond are going outstandingly, and the quantity sold could exceed the 3000 billion forint (EUR 9.1 billion) mark this week”, he emphasised.

He added that as a result of the issuing of the Hungarian Government Security Plus bond, the ratio of sovereign debt owned by the population is increasing to 25 percent, and with relation to the public debt being managed by the Public Debt Management Centre (ÁKK), this ratio could reach 30 percent.

“The government does not currently wish to modify the construction of the Hungarian Government Security Plus bond”, Mr. Varga declared. “The ratio of sovereign debt that exists in foreign currency must be further reduced, and significant results have already been achieved within this field in recent years, with the ratio of forex debt falling to 20 percent from the previous 50 percent”, the Finance Minister stated.

“Thanks to the favourable processes, the state has been able to finance its operations more cheaply than ever before, and since 2012 the yield rates on both long and short-term government securities have fallen significantly by approximately 7 percentage points”, the Minister highlighted.

“While in 2009 the ratio of expenditure involving the payment of interest equated to 4 percent of GDP, the planned level for 2020 is 1.9 percent, which is less than half of the ratio ten years ago”, he pointed out.

“It would be expedient to increase the term of maturity of government securities, in the spirit of which in 2020 the Public Debt Management Centre will be issuing a 20-year benchmark government security. Parallel to this, from the first of January 2020 the ÁKK will also be introducing a new, long government security index (called HMAX), which will include government securities with terms of maturity exceeding three years”, the Finance Minister emphasised. “This will contribute to enabling the more efficient management of long-term institutional investments”, the Minister of Finance pointed out.

With relation to 2019 debt management, CEO of the Public Debt Management Centre Zoltán Kurali pointed out that the Hungarian Government Security Plus (MÁP+) bond has not only facilitated an increase in the ratio of government securities owned by the pubic, but also an increase in the term of maturity of publicly-owned securities, as a result of which the average term of maturity has increased from 1.6 years to 2.6 years.

“Next year, 1058 billion forints (EUR 3.2 billion) worth of forint bonds will be maturing, parallel to which 3768 billion forints (EUR 11.4 billion) worth of publicly-owned government securities will also be maturing. Accordingly, the total financing requirement of public finances will reach 15 percent of GDP, a total of 7305 billion forints (EUR 22.1 billion), with 741 billion forints (EUR 2.25 billion) in foreign currency bonds also maturing. Parallel to this the net financing requirement will reach 0.8 percent of GDP, equating to 376 billion forints (EUR 1.14 billion).

“The first auction for the new 20-year government security will by on 16 January, in addition to which the HMAX index will also be introduced in January, and will include government securities with longer terms of maturity”, the CEO indicated. “The new, 20-year benchmark government security will be put on the market with a 2041 maturity date”, Mr. Kurali told the press.

“We are expecting an increase of 1000-1200 billion forints (EUR 3-3.6 billion) with relation to government securities owned by the public, and 800 billion forints (EUR 2.42 billion) in non-publicly owned securities will be maturing next year”, he noted.

“The ÁKK is planning to issue a maximum of one billion euros in foreign currency securities next year, but this will primarily be involving the public and the Yen and Yuan markets”, Mr. Kurali stated. “We are planning to launch so-called green securities on the Yen and Yuan markets”, he added.

In reply to a question, Mr. Varga said development of the pension bond is essentially complete and it could have been put on the market this year, but the government didn’t want to launch this parallel to all the other new products being made available, and accordingly its introduction is expected during the first half of 2020.

In response to another question, the Minister of Finance said experience indicates that MÁP+ bonds with a face value of 10 thousand forints (EUR 30) are generally purchased by the public via the post office network, while in the case of acquisitions directly from the treasury, the average investor purchases 3.5 million forints (EUR 10,600) of the security.

(MTI)