The step taken today by the Swiss National Bank (SNB) has confirmed that Government measures aimed at lowering Hungary’s forex debt burden have been relevant. The SNB measure triggered extreme exchange rate volatility on forex markets and the Forint depreciated significantly vis-á-vis the Franc.

These developments show it was the right decision to fix the forint exchange rate for the repayment of forex mortgages in December last year. In case of loans denominated in Swiss Franc and Euro, exchange rates were set at CHF/HUF 256.5 and EUR/HUF 309.5, respectively, which has spared forex borrowers from incurring extra debts totalling, at the moment, more than HUF 500bn.

As far as central government debt is concerned, the State Debt Management Agency (ÁKK) exchanges foreign currency denominated debt into Euros; therefore the appreciation of Swiss Franc does not substantially influence the overall debt rate. Swiss Franc-denominated local government debt, which was last year assumed by the state, has been repaid ahead of schedule by the ÁKK; accordingly, these do not elevate the state debt level.

The relevance of Government efforts aimed at lowering the forex debt burden, which have greatly reduced the country’s vulnerability both on a social and individual scale, was highlighted by the SNB decision taken today. The Government is determined to continue with cutting debt, including liabilities denominated in foreign currencies

(Ministry for National Economy)