Hungary’s central bank has started a 500 billion-forint ($2.1 billion) program to boost lending and help end the country’s second recession in four years, Magyar Nemzeti Bank President Gyorgy Matolcsy said.
The central bank may cut its foreign-currency reserves by 3 billion euros ($3.8 billion), keeping the reduction within its risk threshold, Matolcsy told reporters in Budapest today. The reserves were at 32.3 billion euros at the end of February. The “Funding for Growth Scheme” will include interest-free funding for lenders and the conversion of corporate foreign currency loans into forint, he said.
The new monetary-policy chief took office last month after levying the highest bank tax in Europe as economy minister from 2010. The levy helped keep the budget deficit within the European Union’s 3 percent of economic output at the cost of damaging lending and investment.
“After reaching the goals of price and financial stability, the central bank can and must support the government’s economic policy,” Matolcsy told reporters. “We have now reached that point.”
The forint weakened 0.4 percent to 303.65 per euro by 11:49 a.m. in Budapest.
The central bank’s plan will include 250 billion forint of financing for commercial lenders at zero percent interest, which they can use to extend credit to companies at no more than 2 percent, Matolcsy said. Another 250 billion forint will be available to convert corporate foreign-currency debt to forint, he said.
Hungary is also seeking to cut the amount commercial lenders keep in two-week central bank bonds by 900 billion forint, Matolcsy said. The duration of the program is planned for 3 months, he said.