Hungary’s economic rating has reached a 12-year high, Finance Minister Mihály Varga said based on the treasury’s recent successful buyback of dollar-denominated government bonds worth $1 billion (€908 million).
In the January 21-27 period, the State Debt Management Agency announced a week-long buyback of four batches of high-yield dollar-denominated bonds maturing between 2021 and 2024.
In conjunction with this, the agency has also carried out a successful hedge deal to avert currency exchange risks – actually making a profit. The total buyback was financed from the state’s existing Hungarian forint and foreign currency reserves, without the need to issue new foreign currency bonds.
Varga said the buyback will result in the budget saving 42.7 billion forints (€126 million) in interest payment by the end of the financial year 2024, of which savings of 16.5 billion forints will be realized this year.
He said that the country’s economic rating is best measured by the risk premium on such bonds. While in 2010 the risk premium was 400 basis points, which peaked at around 700 basis points when the government was in disagreement with the International Monetary Fund (IMF), currently this stands at 47 basis points, the same as the risk premium for Polish foreign currency bonds.
Image: Hungarian Finance Minister Mihály Varga. (MTI/Zsolt Czeglédi)