Hungarian officials have announced a significant revision to the country's planned foreign currency borrowing for 2025, increasing the net financing target to 1,685 billion forints, nearly double the original goal of 838 billion forints.

The announcement was made during a press conference led by Kornél Kisgergely, the Deputy State Secretary responsible for public finances, and Mihály Hoffmann, the CEO of the Debt Management Agency (ÁKK).

The revised financial plan indicates an additional gross issuance of 3.2 billion euros in foreign currency bonds, translating to a new net issuance projection for the 2025 budget.

This substantial borrowing increase is expected despite ongoing plans for bond repurchases by the end of the year, which are anticipated to maintain a targeted foreign debt ratio of 30%.

Current forecasts suggest that this ratio will slightly exceed the target, reaching 30.2% by year-end, with only a marginal decrease to 30.1% projected for 2026.

The continual rise in cash flow deficits and net financing needs is set to increase by 651 billion forints in 2025, pushing the projected net issuance from 4.7% to 5.3% of the GDP. Kisgergely explained that the rise in the cash flow deficit for the current year can be attributed to three primary factors: the shortfall of EU recovery funds, a less favorable macroeconomic outlook than anticipated, and already announced government measures such as the extension of personal income tax exemptions for mothers.

Previously, the target for the structural deficit was increased to 4.1%, a move confirmed by Kisgergely.

The urgency for these adjustments arose from a substantial overrun in the budget deficit recorded in April, where more than 70% of the entire year's planned deficit had been realized.

Hoffmann noted that in the first five months of the year, strong numbers are reflected across all segments of state financing, with net forint institutional financing realizing 92%, foreign currency financing at 127%, and retail financing at 42% of their respective targets, summing to an overall fulfillment of 88% of the initial financing plan.

Regarding future foreign currency financing, Hoffmann mentioned the ÁKK's goal of diversification, indicating that decisions will depend on the prevailing market conditions regarding the timing and method of market entries.

The specifics of whether to issue foreign currency bonds or secure loans, and in what proportions, remain undecided.

The recent developments highlight the government's recognition of delays in the current year's budget and the pre-emptive steps taken to address potential issues.

However, these actions raise questions about the feasibility of the upcoming year's budget, which is being planned with a projected deficit of 3.7% and may face scrutiny regarding its assumptions.