Billions from Hungary’s utility protection fund flow to Russia amid energy subsidies
The Hungarian government’s Utility Protection Fund, established in 2022 to shield citizens from soaring energy prices, has become a significant financial burden. Recent calculations reveal that the total amount allocated for “utility protection” since late 2022 is approaching HUF 5 trillion Hungarian (approximately EUR 13 billion).
The Utility Protection Fund’s financial allocations have been substantial and varied over the past few years. According to Népszava’s report, in 2024, the fund disbursed nearly HUF 1.3 trillion (EUR 3.2 billion), which represents about half of the HUF 2.4 trillion (EUR 6) spent in the previous year. The state-owned energy company MVM emerged as the primary beneficiary, receiving the lion’s share of the funds at HUF 2.437 trillion. Following MVM, district heating companies were the second-largest recipients, with an allocation of HUF 831 billion (EUR 2 billion).
Criticism
The scale of this spending is put into perspective when compared to other government expenditures. Over the past three years, the Orbán government has spent less on national defence and law enforcement combined than on utility protection. The fund’s expenditure is more than twice the amount allocated for family allowances and triple the state’s cultural spending.
Critics argue that this massive financial injection is essentially a PR operation costing taxpayers trillions of forints. The government’s claim of having the cheapest household electricity and gas prices in the EU is challenged, as it’s achieved through budget reallocation rather than economic efficiency.
Russian gas
A significant portion of the fund’s resources indirectly ends up in Russia. Despite government communication suggesting otherwise, MVM purchases Russian gas at market prices or higher. This arrangement means that a large part of the HUF 5 trillion has ultimately been transferred to Russia, potentially funding its war efforts in Ukraine.
The fund’s existence also contradicts the government’s narrative about the benefits of the 2021 Russian gas purchase agreement and challenges claims that the EU wants to prohibit reduced utility rates.
Questionable allocations
According to Népszava, the government has interpreted “utility protection” broadly, allocating funds to various entities seemingly unrelated to energy costs. Recipients include prisons, secret services, courts, prosecutors, police, military sports, schools, hospitals, and even the Hungaroring racing circuit.
Future outlook of the fund
The fund, partially financed by extra taxes on various sectors, has faced revenue shortfalls. In 2023, the energy sector paid only HUF 435 billion (EUR 1.1 billion) instead of the planned HUF 716 billion (EUR 1.8 billion). Similar shortfalls were seen in mining royalties and pharmaceutical company contributions. For 2025, the fund’s expenditures are projected at HUF 880 billion (EUR 2.2 billion). However, with lower expected extra tax revenues, the system may require an additional HUF 420 billion (EUR 1.05) from other budget sources.
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