Hungary gets $25 billion bailout

BUDAPEST, Hungary (AP) -- Hungary's currency and stock market were rising Wednesday after the International Monetary Fund said the country would get an aid package of up to $25.1 billion (20 billion euros) to rescue its economy hit hard by the global financial crisis.The IMF will provide a 17-month standby loan of $15.7 billion (12.5 billion euros), the European Union is ready to lend Hungary $8.1 billion (6.5 billion euros), and the World Bank will give $1.3 billion (1 billion euros).
Access to the IMF-led funds should allow Hungary to ease investors' fears about its ability to meet debt payments.
Growing indebtedness, a large budget deficit and slowing growth have plagued Hungary in the past years and its currency and stock market were among the worst affected by the global turmoil.
Prime Minister Ferenc Gyurcsany said Tuesday the government would cut the 2009 deficit even further, to 2.6 percent of gross domestic product, after already revising it downward some weeks ago to adjust for the slowing economy.Gyurcsany said Hungary should prepare for the economy to shrink by as much as 1 percent of GDP in 2009, compared to earlier expectations of growth of around 3 percent next year.
IMF Managing Director Dominique Strauss-Kahn praised Hungary's response to the crisis, saying the budget cuts and other measures would bolster the Hungarian economy and boost investor confidence, echoing similar words from the European Commission, the EU's executive body.
French President Nicolas Sarkozy said Tuesday that EU leaders would likely make a final decision on the loan when they meet for a special summit Nov. 7, while the IMF also said it expected final approval for the loans to Hungary's early next month.The EU plans to borrow the money on the capital markets and lend it to Hungary so the loan will not see European governments directly pledge cash to Budapest.
Over the past few weeks, Hungary's currency -- the forint -- has plunged against the euro and the U.S. dollar while the Budapest Stock Exchange's benchmark BUX reached its lowest point in four years.
Volatile exchange rates are a particular problem for Hungarians because many people and businesses took out housing loans and other debts in foreign currencies, mostly in Swiss francs and euros, which carry lower interest rates than loans in forints.
The tumbling value of the forint means regular debt payments have now become far more expensive for many people.
On Wednesday, the forint continued to strengthen, a trend which began Monday after the initial details of the IMF-led rescue plan emerged.
In midday trading, the euro fell as low as 255 forints, from 262 forints late Tuesday, while the dollar was down to 204 forints from 210 in the previous session.
Last week the euro reached a peak near 286 forints while in July it was worth just 226 forints.
The benchmark BUX index of the Budapest Stock Exchange was also rising rapidly, up 11.8 percent Wednesday, with trading in several stocks temporarily suspended because of the large gains.
Hungarian, IMF and EU officials were scheduled to provide details of the agreement later Wednesday.(up loaded by Shahadat)