IMF Approves $15.7 Billion Stand-by Loan For Hungary

Washington, D.C. (AHN) - The International Monetary Fund approved on Thursday the $15.7 billion stand-by loan application of Hungary under the fund's Emergency Financing Mechanism. Hungary was the second country to be extended a bailout package this week by IMF after Ukraine which got $16.4 billion.

Like Kiev, Budapest's financial system has difficulty coping with the strain caused by the global financial crisis.

The two-year stand-by loan will be released in six tranches, with the initial amount of $6.25 billion (4.9 million euro) to be granted right away to address the cash flow problem of the European nation. The five remaining installments will be released after quarterly assessments.

The multilateral agency said in a statement, "The IMF arrangement is designed to facilitate the rapid reduction of financial market stress in Hungary, while supporting the country's longer-run economic goals by creating conditions necessary to facilitate appropriate reforms in government finances and in the banking sector."

Budapest's reeling from the global financial crisis had investors' worried Hungary may not be able to make debt payments and poor market liquidity has caused the Hungarian currency, the forint, to lose 40 percent of its value in October when share on the Budapest Stock Exchange plummeted to four-year lows, although it has recovered later.