IMF approves $15.7 bn loan for Hungary

WASHINGTON: The International Monetary Fund said on Thursday it has approved a 17-month standby loan of $15.7 billion for Hungary, whose citizens are facing financial problems after the fall of the country's currency last month.

The IMF said its Executive Board acted to ``avert a deepening of ongoing financial market pressures'' in Hungary. The approval makes about $6.3 billion available immediately. The rest would be provided in five installments subject to quarterly reviews.

The Hungarian government has warned that a global financial crisis and slowing growth may see its economy shrink by 1 percent next year.

``We're all aware that the road ahead is challenging,'' Anne-Marie Gulde, IMF mission chief for Hungary, told reporters. But, she said, the hope is that combined international efforts will restore a quick return of investor confidence.

The IMF said its loan, combined with commitments from the European Union of about $8.4 billion and from the World Bank of about $1.3 billion, ``will provide Hungary with the amount of reserves that is sufficient to meet its external obligations, even in extreme market circumstances.''

Hungary has been one of the countries in Eastern Europe hardest hit by the global financial crisis as investors' fears that it would be unable to make debt payments and poor market liquidity caused a temporary loss of about 40 percent last month in the value of the forint, the Hungarian currency. At the same time, shares on the Budapest Stock Exchange dropped to four-year lows.