Hungary receives $25.1 billion from IMF, EU, World Bank

One of the most prosperous emerging European countries, Hungary, became the first EU nation in the current global financial crisis to receive a massive combined $25.1-billion bailout from International Monetary Fund (IMF), the European Union and the World Bank.

Some commentatore feel the amount it has received is in excess of what the country needs, as it struggles to confront a huge budget deficit, a large external debt in various foreign currencies and face a possible prospect of recession next year.

Prime Minister Ferenc Gyurcsany Hungary, which joined the European Union in 2004, was able to secure an IMF loan of $15.7 billion to be disbursed over 17 months, while the EU agreed to give $8.1 billion and the World Bank an additional $1.3 billion.

As each IMF member is assigned a quota, which is based on its size in the world economy, Hungary is getting 10 times more than its IMF quota and above the limit of three times the quota for countries seeking to borrow.

EU said that its contribution of $8.1 billion would be raised on financial markets through the issue of EU bonds instead of funds from the EU budget as the European commission is thinking of doubling the EU emergency funding to struggling countries from €12 billion to €25 billion by raising money on the markets through bond issues.

The former communist country saw its public deficit soar to a record high of 9.2 per cent in 2006 and the crisis came as a bolt from the blue as Hungary was seen as a prosperous emerging European country with a robust overseas investment due to its currency-the forint, moving towards adopting the euro.