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Central Bank Contributes Billions To Hungary’s Budget, Under-Fire Governor Explains

By Tamás Székely // 2016.05.06.

The National Bank of Hungary (MNB) is paying a dividend of 50 billion forints (EUR 160m) from last year’s earnings into the budget, news agency MTI reported, citing comments made by governor György Matolcsy, who has been under fire in Hungarian media recently over the controversial management of the funds and foundations of the central bank. “MNB is under political attack because of the successes it has achieved”, Matolcsy insisted.

However, the MNB board decided on the dividend proposal at a meeting on April 27, MTI reported, adding that the dividend will reduce Hungary’s budget deficit by the equivalent of 0.15% of GDP. The Hungarian central bank last paid a dividend in 2002. The board judged that based on profits accumulated in previous years and with further contributions in 2015 to profit reserves, the reserves have now reached a level which makes paying a dividend possible, the central bank said.

In February the MNB said it had posted a record 95 billion forint profit in 2015. It said at the time that its management was committed to placing all profits into profit reserves, as in previous years. After approval by the board of directors, it said the profit reserves would rise to above 150 billion forints as a result, or almost 0.5% of GDP, and the high profit reserves would prevent the need for central budget transfers to make the MNB profitable in the long run.

Meanwhile the opposition Socialist Party (MNB) continues to criticize the the National Bank governor. “MNB has become little more than an instrument to channel public funds into businesses close to ruling Fidesz party”, Socialist MP Sándor Burány said referring to documents containing details of the central bank’s 6-billion-forints media contracts. According to Burány, many MNB agreements constituted corruption, as “the bank’s programmes were tailored to the financial requirements of family members and the companies of friends.”

via MTI, and photo: Imre Földi – MTI