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Hungary Eyes IMF Deal of as Much as $15 Billion Euros, Citi Says

Hungary may be targeting an International Monetary Fund-led safety net of as much as 15 billion euros ($20 billion), Citigroup Inc. said, citing unnamed government officials.

The Cabinet, which will start negotiations this week with the IMF and the European Union, may aim for a backstop of between 10 billion euros and 15 billion euros, Citigroup’s David Lubin and Eszter Gargyan said in a report published on Dec. 9 after meeting officials in Budapest.

Hungary last month lost its investment-grade credit rating at Moody’s Investors Service after seeking a backstop. Prime Minister Viktor Orban reversed his policy of shunning international aid after the forint fell to its weakest against the euro and the government struggled to raise planned amounts at debt auctions.

“Since the Prime Minister has already spent some of his political capital in embracing the idea of an IMF agreement, it seems that the sensible option now is quickly to gain the benefits that such a deal would bring,” Citigroup said. “2012 seems to provide a decent window in which to shore up Hungary’s economic credibility.”

Hungary’s ability to sell a planned 4 billion euros in foreign-currency denominated debt next year is “heavily dependent” on the government obtaining an IMF-led aid package, Lubin and Gargyan wrote. An agreement may create a “virtuous circle” for Hungarian financing, they said.

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