BREAKING – Hungary took out a gigantic Chinese loan in secret – avoiding bankruptcy?
The Hungarian government did not communicate that they took up a gigantic EUR 1 billion Chinese loan from Chinese banks to spend on fuzzy infrastructure projects. Taking maturing bonds out of the equation, this is the Hungarian state’s highest loan. We do not know the loan interest, and the Hungarian institutions remained silent about its purpose either.
Secret Chinese loan before the 9 June elections
The incredible new loan uptake was spotted by portfolio.hu in the data of the Government Debt Management Agency (ÁKK). The creditors are Chinese banks like the Chinese Development Bank, the Chinese Eximbank and the Bank of China Hungarian Branch. The repayment deadline is 19 April 2027, while the government took it up on 19 April.
Based on the explanation, the Hungarian government would like to spend the money on high-tech developments, infrastructure, transport and energy projects. The interest rate is not fixed, but the numbers remain in secret.
The Hungarian government “forgot” to mention the loan in its official communication before the 9 June European parliamentary and municipal elections. The ÁKK told portfolio.hu that the rate of the Hungarian state debt in foreign currency would remain under 28.9%, below the 30% threshold, which is better than the 50% in 2010. That refers to the pre-Orbán Socialist government.
The biggest loan in Hungary
One billion euros is the biggest Hungarian loan currently, not considering bond issues. It can be compared with the Chinese loan Budapest took up for the Belgrade-Budapest railway development, which was USD 917 million then.
Portfolio could not discover whether the Chinese loan was advantageous or not because all financial institutions keep the interest rate secret. Based on the interest rate of the January bond issue (4%), it has to be lower to be good for the country.
Interestingly, the Hungarian government regularly reported about its loan uptakes, and the process was easy to follow for journalists before. This Chinese loan, however, was an exception. Or will it be an example?
Where is the money?
Nobody knows whether the government already spent that money, even though there are multiple ideas of where they could put it. First, the Hungarian state budget struggles with significant deficits, so the Orbán cabinet raised taxes in July.
Furthermore, the Hungarian government bought 80% of the Budapest Airport shares in June for EUR 2.5 billion, so the Chinese money could cover part of that transaction. Or the government could fill some holes in the state budget with it. Moreover, the Orbán cabinet must pay EUR 200 million to the European Union as a fine following a Court of Justice of the European Union decision.
Márton Nagy, Hungary’s national economy minister, talked about the increasing rate of Chinese financing in Hungary. For example, he said the Bank of China might cover infrastructure development projects, helping the trade of Chinese companies.
He added that since Western and Eastern FDI are present in Hungary, Chinese banks will show up in monetary financing.
Of course, that does not mean they must finance the Hungarian state with loans.
Read also:
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- Budapest-Belgrade railway line: Construction resumes, date of the Hungarian section’s completion out
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