Despite the pandemic, debt repayment remains right on schedule

While previous, Socialist governments were notorious for taking out large, irresponsible loans and driving up public debt, since taking office in 2010, PM Orbán’s cabinets have sent the IMF packing and paid back a large chunk of those dreaded loans. And despite the coronavirus pandemic, this trend continued in 2021 as well.

According to Finance Minister Mihály Varga, Hungary repaid a total of USD 430 million of debt in 2021. In a video uploaded to his Facebook page last week, the minister said that with this step, Hungary has bought back short-term, foreign currency bonds and replaced them with long-term bonds at more favorable interest rates.

He stressed that this has saved the country almost HUF 10 billion, improved the maturity of government debt, and bolstered Hungary's financial stability.

"So even after a crisis, Hungary is able to repay its debt not only on time but also before maturity," the minister said, adding that this is one of the reasons why Hungary can end this year with a ”recommended for investment” rating from all three major credit rating agencies.

Just a few days after this announcement, Varga had more good news to report. In another round of debt refinancing, Hungary managed to make a significant early repayment of HUF 1.3 trillion.

This means, according to the minister, that by taking advantage of investor confidence in the Hungarian economy and the favorable environment, the country was able to exchange HUF 1.3 trillion worth of short-term government bonds for long-term bonds with a maturity of between 8 and 20 years.

Minister Varga touted the refinancing because with the longer maturity, the cost of any interest rate changes is spread out over several years. He added that this also makes interest expense more predictable, which in turn brings increased economic security by lowering risk.

With this repayment of HUF 1.3 trillion and the USD 430 million repayment announced last week, Hungary's public debt repayments remain on a strong footing.